The industry corrected stocks – Newspaper Kommersant No. 161 (7362) of 09/02/2022

The next set of leading indicators of the state of the industry in the Russian Federation in August 2022 captures multidirectional dynamics, although most of them show some improvement in the situation in the sector. Like the leading indicators of Rosstat and the Russian Union of Industrialists and Entrepreneurs (see Kommersant of September 1), the S&P Global PMI index in Russian processing (calculated on a relatively small sample of about 300 companies) increased in August to 51.7 points from 50.3 points in July . The rise was supported by rising domestic demand, with new sales growing at the fastest pace since April 2019. Exports continued to decline at the fastest pace since May. Against this background, the companies moved to increase selling prices.

The results of surveys of industrialists by the analysts of the Gaidar Institute (IEP) in August record a moderately negative dynamics of demand – sales slightly decreased by July. This has been going on since April and “begins to disappoint the industry, which keeps demand forecasts from going up and does not allow for a transition to sustainable output growth,” said Sergey Tsukhlo, author of the study. The share of normal demand estimates after the failure in March and a slight recovery in May is slowly declining – 51% against 53% in July.

The decrease in output, registered by the IEP in July after the growth in June, continued in August. And while civilian production plans are back on track, the stock-out period that the industry has been under for the previous 24 months and that has supported inventory release appears to be coming to an end (see chart). Estimates of stocks of raw materials and supplies also showed a positive trend. A slight decrease in the normal supply of Russian components and raw materials (from 79% to 74%) was combined with an increase in the supply of imported ones – from 20% to 29%, which supported the improvement in the dynamics of industrial production in July (see Kommersant of August 30).

Unlike S&P Global, IEP respondents reduced selling prices for the third month in a row, and their investment plans are in deep red. First of all, they can be improved by the predictability of the economic situation (68% of responses), the end of the sanctions war and the return to trade and economic relations with the West (51%), and the reduction in prices for equipment and construction installation (50%).

Alexey Shapovalov