A lot of metal products – Newspaper Kommersant No. 243 (7444) dated 12/29/2022

November data from Rosstat on industrial production, which showed the same dynamics as a month ago – slow growth – the industry has a small chance to close the year, compensating for the decline in output in civilian industries by growth in the military-industrial complex, approximately at the level of 2021. November estimates of GDP allow us to talk about its relatively low annual decline. The Ministry of Economy is talking about the successful continuation of the restructuring of industry – however, the process itself is unlikely to look positive and stable in the coming months.

The last macroeconomic data in 2022 falls on November, which does not allow us to confidently assume anything about the statistical results of the year: December, due to the budget structure and the peculiarities of the management culture in the Russian Federation, is a decisive month for annual indicators, and November data that is positive in any aspect can easily be covered by December results. Yesterday Rosstat published the November reports of industrial production and social indicators (see materials on the same page) in the Russian Federation, which illustrates this feature of statistics well, but most comments on these data were extremely cautious.

Industrial data, the authors of the MMI Telegram channel say, is “noticeably better” than expected. Rosstat shows an increase in industrial output by 1.6% (nominally) compared to October and, seasonally adjusted, an increase of 0.7%, the same as last month. In year-on-year terms, according to the methodology of Rosstat, this is a 1.8% drop in output, which is why for 11 months of 2022, compared to 11 months of 2021, industrial production decreased by a symbolic 0.1%. According to their methods, the primary data of Rosstat are reassessed by the Ministry of Economy (they mainly talk about the “near-zero” dynamics of the industrial production index in November) and the CMASF (growth compared to October with a cleared seasonality of -0.5%, the fall of the index in January-November 2022 to the data 2021 – 3.3%). In principle, the assessments do not differ – strong December data can lead to a zero drop in industrial production in 2022, weak ones – to a very moderate decline in industry within 2%.

Note that the picture is similar with the assessment of Russia’s GDP for 2022. The Ministry of Economy is the only structure in Russia that evaluates it on a monthly basis. The agency’s assessment of the year-on-year decline in GDP in November is 4%, after a decline in the same dimension by 4.5% in October. Seasonally adjusted, like a month earlier, GDP in November showed an increase of 0.2% compared to the previous month. As in the case of industrial production, the last month (official data for which will be in late January – early February 2023) may change the “picture” (but not the economic content): over 11 months of 2022, GDP, according to the Ministry of Economy, decreased by 2 .1%, depending on the December figures, the annual decline may be noticeably less than 2%, a fall of 3% is also conceivable. However, in any case, this is less than the forecasts for a fall in mid-summer (from 7% to 10% of GDP) – mainly due to a significant increase in monetary exports amid a collapse in imports, the construction of sanctions imposed by large jurisdictions against the Russian Federation after the start of military operations in Ukraine , contributed at least at the beginning to a moderate and, apparently, longer-term decline in GDP and economic growth potential, although other goals and scenarios were declared when they were introduced.

The data on entrepreneurial confidence indices published by Rosstat are also very uncertain (in contrast to the estimates of this indicator for the EU countries given in the same summary – they are definitely bad, except for the estimates for Germany and the Netherlands, where they are better in November than in the Russian Federation). Formally, entrepreneurial confidence in both extraction and processing returned to the balance of neutrality of average estimates. However, sentiment is worse in processing, although in this sector, expectations for a future release in the next three months are still high.

The structural restructuring of industry, which is talked about a lot in the Ministry of Economy and the Central Bank, is obviously continuing – but so far the softness of its impact on industrial production and GDP is determined by new demand from the army. Thus, almost all commentators, not excluding the Ministry of Economy, note a continued decline in output in the “civilian” industries oriented to domestic demand (for example, the CMASF assumes a new decline in the production of building materials, in the automotive industry, woodworking – with stability in the export chemical industry and growth in the sector energy resources – oil, gas and coal), with an increase in output in the production of “metal products” (growth by 15.9% in November year-on-year) and “other vehicles and equipment” (16.5%). The latest terms in Russian statistics often hide the products of the military-industrial complex. The CMASF review gives a similar picture – in a number of cases, the center’s indices do not take into account the products of the defense complex, so the CMASF estimates often look more pessimistic than those of Rosstat.

It should be noted that under the “structural restructuring of industry” in the Ministry of Economy it is unlikely that this effect is meant – at least, it is not yet known about the implemented new projects in the military-industrial complex, the “restructuring” is not about the expected temporary partial militarization of industry, but rather about its greater loading at existing facilities.

Dmitry Butrin