Russia: Industrial output contacts at sharpest rate since September 2009 in May
June 17, 2020
Industrial output dropped 9.6% compared to the same month a year earlier in May, which was a larger contraction than April's 6.6% decrease. May's result marked the sharpest plunge since September 2009.
The downturn was largely driven by contractions in mining and quarrying and electricity, gas, steam and air conditioning supply production. Moreover, both manufacturing output, and water supply and sewage activities shrank in May, albeit at a slightly softer pace than in April.
On a monthly seasonally- and calendar-adjusted basis, factory output contracted 1.3% in May, following April’s 6.9% drop. Moreover, the trend pointed down, with the annual average variation of industrial production slowing to 0.4% in May (April: +1.2% mom). The reading marked the worst result since July 2016.
Commenting on the result, Dmitry Dolgin, chief Russia economist at ING, said:
“We do not take May's 9.6% YoY drop of industrial production as too negative, as around 5.0 pp out of it was related to the cut in commodity extraction, while the manufacturing sectors, accounting for over half of overall industrial output actually bounced back from the April lows along with the easing in the nation-wide lockdown.
Meanwhile, this doesn't mean that the path to recovery will be fast and easy. First, the OPEC+ restrictions are here to stay for at least the next couple of months, while the revival of the manufacturing sector will be challenged by uncertainties with the local demand. Industrial output is likely to show a 5-8% YoY decline in the coming months, and we do not exclude that the calls from the industries to further ease fiscal and monetary policy may intensify.”