Industrial output was down y-o-y in January, but less so than in 4Q22

RUSSIA ECONOMICS - In Brief 23 Feb 2023 by Alexander Kudrin

---

Rosstat reported that in January, industrial output contracted by 2.4% y-o-y as the mining segment fell by 4.3% and the manufacturing by 3.0% (also y-o-y). According to Rosstat's estimates, seasonally adjusted industrial output in January decreased by 0.6% m-o-m (though, one can raise questions about the reliability of seasonal adjustment procedures in the highly volatile environment, strong and uneven base effects, seen in recent years). Overall, the industrial performance in January didn't look too bad as it's y-o-y contraction was not as deep as in December 2022 and 4Q22 (4.3% and 3.0%), though in the mining segment it deepened a bit. Mining was down in January by 3.1% (versus 2.5% and 2.6%) due to deepened contraction in the gas industry and extraction of metal ores. Manufacturing performed better in January as it was down by a mere 2.3% y-o-y (versus 5.7% and 3.4% in December 2022, and 4Q22). Vehicles production, chemical, timber/woodworking, metal segments led the decline. The latter three were largely affected by shrinking exports. Other manufacturing sectors performed better, especially food production where growth was recorded all across the board. Metal-working, pharmaceutical, electronics/computers production were also visibly up.In this regard it looked unsurprising that inflation w-o-w in the seven days ending on February 21, decelerated to 0.06% from about 0.2% in the previous weeks. Inflation MTD reached 0.46% on the same day implying that inflation in February could be lower than expected (say, not higher than 0.55%). Still, it may not be enough for the CBR to consider the key rate cut in mid-March. Evgeny Gavrilenkov Alexander Kudrin