Industrial growth slows in June

RUSSIA ECONOMICS - In Brief 25 Jul 2024 by Evgeny Gavrilenkov

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Rosstat reported that in June, industrial growth decelerated to 1.9% y-o-y. In seasonally adjusted terms, it contracted by 1.5% m-o-m. As a result, in 1H24, Russian industry grew by a mere 4.4% y-o-y. The mining segment contracted in 1H24 by 1.3%, while manufacturing grew by 8.0% (both y-o-y.) In June alone, mining contracted by 3.1% y-o-y. Manufacturing grew y-o-y by 4.6% over the last month. We think that this deceleration mainly stemmed from the fact that in June 2024, Russia had only 19 working days, while a year ago, it was 21. It is not unusual that the Russian authorities move working and calendar days quite regularly (say, adding additional days off to some national holiday if it is close to a weekend and compensating by additional working days some other month). Hence, seasonally and calendar adjustments may be misleading on some occasions. Interestingly, in such a segment as natural gas extraction, the output grew by 11.2% y-o-y, and production of condensed gas (on oil fields) was also up y-o-y last month. These segments operate on a non-stop basis. In most other mining segments, such as coal, production was down in June. The workforce in these segments has the same working days as the rest of the country. Therefore, we tend to believe that the reported slowdown in the industry was a one-off effect, and in the next few months, it will catch up with its previous growth trajectory.