Russia: Industrial output continues to contract severely in June
Industrial production dropped 9.4% year-on-year in June, improving marginally from May’s 9.6% dive which had marked the sharpest plunge since September 2009.
June’s reduced drop was largely driven by a slightly softer decrease in manufacturing production. In contrast, mining and quarrying production fell heavily at the tail-end of Q2.
On a seasonally- and calendar-adjusted monthly basis, industrial output fell 1.0% in June, up from May’s 1.8% drop. Meanwhile, the trend pointed down, with the annual average variation of industrial production coming in at minus 0.5% in June, contrasting May’s plus 0.4% reading.
Commenting on the result, Dmitry Dolgin, chief Russia economist at ING, noted:
“The overall industrial result may seem to clash with the mounting fiscal support, as the federal budget deficit widened massively to RUB0.7 billion in June and RUB1.0 trillion in 1H20 on both a decline in revenues and acceleration of spending […]. However, looking at the structure of 1H20 spending, the picture becomes more consistent, with just 26% YoY growth of spending on the corporate economic activity vs. 80% YoY increase of non-pension social, 109% YoY increase in healthcare expenses, and 64% YoY increase in transfers to regional budgets.
With the 5.2% YoY drop in industrial output in 1H20, our -4.5% expectations for the full-year are still achievable. The June industrial output data combined with the budget fulfillment eases some of our concerns regarding the near-term consumer trend, while putting construction and investment activity on the spot.”