Industry keeps growing steadily as domestic demand remains strong

RUSSIA ECONOMICS - In Brief 27 Jun 2024 by Evgeny Gavrilenkov

---

Rosstat reported that in 5M24, the industrial output grew by 5.2% y-o-y. In May, it grew by 5.3% y-o-y and 2.0% m-o-m in seasonally adjusted terms (therefore, offsetting a minor m-o-m seasonally adjusted contraction by 0.1% in April). The mining segment remains almost flat, having grown by a mere 0.2% y-o-y in 5M24. In May, it contracted by 0.3% y-o-y. So far, there are no signs that the mining sector may start expanding, as there is no need to increase production in this segment given that there is no deficit in raw materials domestically and the balance of payments remains strong enough. The manufacturing segment grew y-o-y by 8.8% in 5M24, i.e., the same as in 1Q24. Growth rates vary across sub-segments, and only a few posted either a minor contraction or a near-zero growth. Chemical and timber/wood-working industries, which remained under pressure last year, delivered at least 6.4% and 6.0% y-o-y growth in 5M24. Various machinery segments grew at double-digit rates over this period. All in all, it looks as though industrial growth accelerated in May and may exceed expectations by the end of the year. As industry remains an essential part of the country’s GDP, recent statistical data do not challenge our view that the economy may grow by well over 4% this year. The economy, however, looks overheated as budgetary spending is generous and consumer credit growth is also strong. Hence rising inflationary pressure. In the seven days ending on June 24, inflation w-o-w accelerated to 0.22%, which brought the MTD tally to 0.58%. As last year, inflation in June was 0.37% m-o-m, inflation y-o-y will soar by the end of this month. At some point, the government will need to tac...