TsMAKP records a noticeable slowdown in the economic dynamics of the Russian Federation

Against the backdrop of positive economic results in 2023, analysts from the Center for Macroeconomic Analysis and Short-Term Forecasting (CMACF) see signs of a noticeable deterioration in the dynamics of many economic indicators at the end of 2023 – beginning of 2024. The exception is the dynamics of wages, which can improve private demand indicators. The situation with investments, according to the center’s analysts, is less promising.

In the March issue of the monthly note “Analysis of Macroeconomic Trends,” TsMAKP experts record: “data on the development of individual sectors inspires a fair amount of tension – the growth of household consumption and, apparently, investment has stopped, and the export of goods is falling. On the production side, growth in industry (and, probably, in construction) has stopped; there is a decline in transport.” In addition, for the first time since the spring of 2022, the demand for labor has fallen very noticeably. “Either this is a situational failure in a previously formed mechanism, or the beginning of a trend to optimize employment – and the “stock” of ineffective jobs in construction, agriculture, trade, security, etc. is very large – or a sign of recession,” the center’s analysts state. noting that “time will tell” the true reason for what is happening.

Although a revival of consumption against the backdrop of rising wages and household incomes can most likely be expected, analysts note, and data from leading indicators proves this (see Kommersant on March 13), the absence of any “positive” in industrial dynamics in recent months is obvious , and the growth of capital investments has stopped (according to the calculations of the Center for International Relations, in the third quarter of 2023 – plus 1.8%, in the fourth – minus 0.1%, seasonality eliminated). In January 2024, investment activity in the economy, according to the center, continued to stagnate. The supply of investment goods in the economy in January was 3.1% below the 2023 high (see chart). The reason is a slow decline in the supply of basic building materials with an increase in the supply of domestic machinery and equipment. Construction at the beginning of the year corrected, negating the effect of the jump at the end of 2023, and may already be sliding into stagnation (third quarter of 2023 – plus 0.1% on average per month, fourth – plus 1.1%, January 2024 – minus 1.3%, seasonality eliminated), however, at the historically maximum level after the “boom”. These results, in general, correspond to data on the production of building materials and, apparently, indicate an impending stop of the “construction boom,” the center’s analysts conclude. The decline in investment in machinery and equipment is also likely to increase, and there appears to be a shortage of imports of a number of types of components, raw materials, spare parts, specific consumables, etc., they add.

There are several reasons for the slowdown in investment activity. “This is apparently partly due to the exhaustion of previous “growth ideas” (infrastructure, import substitution, defense industry, housing construction), partly to the tightening of lending conditions in general and mortgage lending in particular, and partly to the emerging decline in profitability in a number of industries,”— noted in TsMAKP. The industry is experiencing deflation, which could lead to a collapse in the earnings of key industries and make the economy extremely vulnerable to a “dear money” situation, especially in relation to investments, analysts say. Already, profitability in most industries, according to their estimates, is declining, in a number of them it has equaled or become lower than the “cost of money”: these are mechanical engineering, transport engineering and woodworking.

Artem Chugunov