Industry keeps growing with no surprises

RUSSIA ECONOMICS - In Brief 27 Dec 2024 by Evgeny Gavrilenkov

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Rosstat recently reported that the Russian industrial output expanded by 4.3% y-o-y in 11M24, posting some y-o-y deceleration as in November alone, it grew by 3.7% y-o-y amid uneven last year’s base effects. Seasonally adjusted (by Rosstat) industrial output increased in November by 0.7% m-o-m, which was on par with the average monthly seasonally adjusted m-o-m growth this year. November industrial statistics didn’t challenge our 2024 forecast as we expected the Russian industry to expand by 4.3% this year – to be followed by a gradual deceleration in 2025. In 11M24, the mining segment contracted by 0.8% y-o-y and is generally slowing gathering pace as in 2Q24 and 3Q24, it was down by 1.3% y-o-y in both periods. We expect the mining segment to deliver a slightly positive growth in 2025. The manufacturing segment keeps growing faster (up by 8.0% y-o-y in 11M24). In November alone, it was up by 7.2% y-o-y. In 2025, its growth will gradually decelerate as it is still largely stimulated by a specific government demand that cannot accelerate indefinitely due to natural mid-term to long-term budgetary constraints. Decelerating consumer demand (not least due to falling appetite for credits amid high interest rates) will also contribute to this growth moderation. This deceleration is seen, for instance, in car production. In November, production of cars was up by 25.1% y-o-y, while in 11M24, it grew by a more impressive 39.1% (amid base effects, though). Continuously high inflation will also suppress real economic growth in 2025, industry including. According to Rosstat’s flash estimate, in the seven days ending on December 23, inflation w-o-w was 0.33%, i.e., more or less the...