Page 29 - RusRPTMar20

4.0​ Real Economy
4.1​ Industrial production
Rosstat reported Russia’s industrial production decelerated to +1.1% y/y in January​, from the revised +1.7% y/y in December on February 17.
In January, growth was mainly supported by manufacturing, which was up +3.9% y/y against the backdrop of weakening output in mining & quarrying (-0.4% y/y).
The data on industrial production has been revised due to the change in the base year from 2010 to 2018: the revision boosted IP growth in 2018 from +2.9% y/y to +3.5% y/y, whereas the headline number for 2019 was downgraded slightly from +2.4% y/y to +2.3% y/y.
The data review mainly upgraded manufacturing for 2018 from +2.6% y/y to +3.6% y/y. ​At the same time, the data for 2019 saw a downward revision for mining & quarrying from +3.1% y/y to +2.5% y/y, with the largest amendments happening to 2H19, whereas the statistics for manufacturing were boosted from +2.3% y/y to +2.6% y/y.
Rosstat's flash report does not provide any information as to what particular industries within IP were altered the most, as Rosstat has yet to publish a fuller data package for January containing item-level data and the revised data for 2018-19.
In manufacturing (+3.9% y/y), the growth was underpinned by the production of food, electronic & optical equipment, machinery, repair & installation and petrochemicals.
Food production has remained one of the locomotives of growth in manufacturing​: in January, food production increased +11% y/y, adding +1.3pp out of the +3.9% y/y headline growth in the sector, on our estimates.
VTBC has been arguing that food inflation had been contributing to the CPI deceleration in both y/y and m/m SA terms since May. In particular, meat and fruit & vegetables prices added the most to the slowdown in consumer prices and have mainly been driven by supply factors, in our view. Rosstat's IP flash report suggests that, in January, meat production grew by an overwhelming +9.9% y/y (the number for fruit & vegetables is not available in the flash report).
As provided by the flash report, in January, the production of sugar saw a 3-fold increase, while sugar prices dropped -32% y/y in the same period.
This might imply that the deceleration in food prices inflation is not going to be over in the near future.
In mining & quarrying, as shown in the flash report, most of the items were in the red in January: ​in particular, coal production declined -9.3% y/y,
29​ RUSSIA Country Report​ March 2020 ​ ​www.intellinews.com