The industry is simplified in stagnation – Newspaper Kommersant No. 218 (7419) of 11/24/2022

Rosstat statistics on industrial production in October allows fixing the suspension of its recovery, especially in terms of the release of investment goods and non-military industries. In general, the picture of the sector is similar to that recorded earlier by leading indicators, as long as it is about the end of the decline in the industry, stagnation or weak growth. At the same time, partial mobilization determined a sharp increase in the shortage of personnel, which may additionally slow down the recovery, along with other factors. The government considers the current situation in industry and services acceptable, referring to the fact that previous forecasts for economic dynamics were significantly worse.

According to Rosstat, in October, industrial output decreased by 2.6% in annual terms against a decline of 3.1% in September, and in January-October 2022, the industry was at the same level as a year ago (growth by 0 ,one%). In October, according to statisticians, the volume of industrial production for the first time since the beginning of the year coincided with the level of the same month in 2019 (minus 0.1%).

The decrease in production compared to October 2021 against the backdrop of a relatively high base was observed in all four main industrial sectors.

In processing, for example, the production of cars and trailers shrank the fastest – by 45.2%, and grew – computers, electronic and optical products – by 18.3%. At the same time, the decline in output in terms of “year-on-year” in October was slowed down by an acceleration compared to September 2022, seasonally adjusted (by 0.7% after a drawdown of 0.5% in September and 0.9% in August, according to Rosstat). The CMASF continues to call this trend “unsustainable stagnation.” According to seasonally adjusted statisticians, the recovery of production volumes, which was outlined in July, did not continue in September (see Kommersant of October 26), but October again returned a weak positive to the corresponding dynamics.

This jump can be partly explained by the estimates of the CMASF, which exclude those related to the military industry and extremely volatile positions for understanding the situation in the industry (see chart), according to which, taking into account seasonal and temperature factors, output in October decreased by 0.2% compared to September against growth of 1.4% a month earlier. The pause in the recovery of industrial production recorded by the CMASF is partly explained by a warm October (3°C warmer than the average for 15 years), which subtracted 0.3-0.4 percentage points from the result of the industry.

However, even without the influence of this factor, the slowdown is obvious and is largely due to the deterioration in oil production.

The recovery continues (albeit slower than the average for the third quarter) in the production of durable goods (in October, largely due to a surge by a third in the production of cars against the backdrop of a sharp drop in the production of trucks), everyday demand and intermediate goods. Markedly, according to Vladimir Salnikov from TsMAKP, in anticipation of new restrictions, the production of coke and petroleum products is growing. The recovery in the output of investment goods stopped after slowing down in the previous two months. The Ministry of Economy does not give estimates of the dynamics of industrial production, taking into account seasonality. “In general, growth in the industry amounted to 5.3% m / m compared to September after 0.5% m / m earlier,” the agency broadcasts “raw” data from Rosstat.

Despite the jump in output, according to statisticians, Rosstat itself notices that the weak indicators of industrial production in October correspond to the data of the agency’s leading survey indicators, which once again turned out to be worse than other similar measurements (see “Kommersant” dated November 3). Leading Processing Status Indexes – PMI S&P (see “Kommersant” dated November 2) and industrial optimism – the Gaidar Institute (IEP, see “Kommersant” dated November 11) after partial mobilization recorded a noticeable deterioration in the shortage of personnel in the sector and a slight decrease in demand and output. It should be noted that, according to the IEP, in August-September, processing got rid of the shortage of stocks of finished products, which has been observed there for the past two years. “The industry has been given the opportunity and has shown a willingness (minimum so far) to maintain a controlled surplus of inventories,” notes Sergey Tsukhlo, author of the study. And if the uncertainty of the economic situation and demand in October reduced their negative impact on the prospects of the sector, then the shortage of personnel and the lack of machines increased. “Problems of credit, a weak ruble and productivity are the least of all concerns for industrial enterprises,” he concludes. According to the VEB Institute, at the end of 2022, machine building and woodworking will suffer the greatest losses, while oil and gas production will decline to a greater extent in 2023.

On Wednesday, November 23, at an economic meeting in the government, Prime Minister Mikhail Mishustin stated: “Some slowdown in the dynamics in the current situation was inevitable. The economy needs time to rebuild.” At the same time, he drew attention to the data on GDP in the third quarter – the decline is moderate, the White House suggests that it will probably be below 3% by the end of the year, with the forecasts for a decline of 7-10% of GDP that existed in the summer.

Artem Chugunov, Dmitry Butrin