While Rosstat reports industrial explosive growth, which is double-digit for the first time since the 2000s, factories and plants across the country are slashing production en masse.
Although the annual industrial growth rates exceeded 10% in May and June, this result is nothing more than a reflection of the depth of the hole into which the economy fell last year.
Industrial statistics look nice when compared to the pandemic bottom, but month on month in all sectors, except for raw materials, production volumes are falling for five months in a row.
In February, the decline in the manufacturing sector amounted to 1.9% versus January, in March – 0.2% versus February, in April production volumes were another 0.2% lower than in March, and in May and June they sank by an additional 1%. and 1.4% every month, experts from the HSE Development Center calculated.
For four of the last five months, food production has been falling (by 2.9% in June compared to May). The production of drinks, clothing, and medicines is declining by the same amount.
For two months in a row, the output of petroleum products has decreased, while the auto industry is steadily heading into a recession, reducing production without interruption from February to June (by 1%, 2.2%, 0.3%, 1.7% and 2.9% month by the month, respectively).
“The recovery rise in the intensity of industrial production ended in January 2021,” after which “the dynamics passed into a stage of stagnation,” HSE experts write.
Moreover, stagnation is ensured due to the growth of raw materials production – by 0.3% in January to December, by 0.8% in February compared to January, by 1.6% in March, by 1.8% in April, by 1, 1% in May and June (compared to previous months).
The softening of the terms of the OPEC + deal and the growth in demand for gas in Europe pulled out monthly industrial growth from March to May to zero (0.1%, 0.6% and 0.1%, respectively).
But June brought an acceleration in the recession in factories and non-commodity pipe mills. And increased production could not compensate for it: the industry as a whole across the country reduced output by 0.2%.
The problem for enterprises is the sharp acceleration of inflation, due to which the cost of purchasing raw materials and components is growing at a record speed in 12 years, the IHS Markit poll showed.
This is forcing companies to raise their selling prices. According to the Federal State Statistics Service, the rate of inflation in industry is above 30% and has been breaking records since the beginning of the 21st century. At the end of June, the producer price index increased by 31.1% year-on-year – this is how much the cost of products shipped from factories and plants increased. A month earlier, industrial inflation reached 35.3%. This, in turn, hits demand: new orders in June fell for the first time in 8 months, writes Markit.
In general, the industry has been demonstrating output levels above pre-crisis values for three months in a row, but the space for recovery growth is close to exhaustion: the initial stage of this process is already being recorded in processing and energy, said PSB analyst Denis Popov.
The main driver in the coming months will be the extraction of raw materials, which has entered a phase of active recovery due to the softening of the terms of the OPEC + deal, he points out.