Russian industry continues to expand, albeit annual growth decelerates

RUSSIA ECONOMICS - In Brief 29 Aug 2023 by Evgeny Gavrilenkov

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Rosstat reported that industrial output grew y-o-y by 2.6% in 7M23, which was higher than 2.2% in 1H23. At the same time, industrial y-o-y growth decelerated in July to 4.9% (from 6.7% and 5.8% in May and June). Of course, there were strong base effects several months ago - amid a low 2Q22 base. On top of that, Rosstat revised industrial monthly statistics for 2022 and 1H23. Therefore, the new data point to a slightly different picture, such as decelerating y-o-y growth. Meanwhile, Rosstat reported that seasonally adjusted industrial output slightly contracted m-o-m for the second month in a row - by 0.1-0.2%. Before that, however, seasonally adjusted m-o-m growth was quite strong – often over 1.0%. However, one may question the reliability of the seasonally adjusted numbers amid strong one-off base effects. Manufacturing grew y-o-y by 6.1% in 7M22 (versus 5.5% in 1H23), while the mining segment contracted by 1.3%, similar to the 1H23 number. Overall, the Russian industry is not too bad a shape as almost all sub-segments of manufacturing posted quite visible growth in 7M23 (except timber, woodworking, paper production, and the pharmaceutical segment). Generally, the industry is heading toward an increase of several percent this year.