Page 36 - RusRPTDec20

4.1​ Industrial production
In October Russian industry posted 5.9% y/y decline, a deeper contraction than seen in September (-3.6% y/y).
The resource sector was the only one to show an improvement in trend
(-8.8% y/y v -9.4% in September). At the same time manufacturing industry posted a sharp reversal with a fall of 4.4% y/y last month after growth of 0.5% y/y recorded in September. Output in the utilities segment dropped by 3.7% y/y (-2.4% y/y in September). In 10M20 industrial production was down by 3.1% y/y, according to Rosstat. In seasonally-adjusted terms, industrial production fell by 5.5% y/y in October and by 3.1% y/y in 10M20.
Falling investment demand was the main driver behind the change in the trend​. No doubt, the spread of coronavirus had a direct negative impact on consumer behavior forcing many Russians to postpone purchases and take a cautionary stand on new spending. However, the data from Rosstat shows that in October these changes had only limited effect on many consumer-related segments of industry with some major sectors even posting solid growth: food industry was up by 1.8% y/y, production of textiles – by 11.5% and automotive industry – by 1.6% y/y (car production increased by 5.4% y/y). At the same time falls in production of many investment goods were much more significant, including construction materials and non-consumer electronics.
No relief until 2021.​ Russian economic output will remain under pressure in 4Q20 due to weakening domestic demand and introduction of stricter quarantine limitations. The dynamic of economy and industry should start to improve in 2021, particularly from 2Q21 onwards when a reversal in the base factor will produce high y/y gains in growth rates. Fundamentally, we expect to see stabilization of seasonally-adjusted output and a return to sustainable growth pattern in 2H21 when, as we hope, mass vaccination will preclude a victory over the spread of coronavirus.
36 ​RUSSIA Country Report​ December 2020 www.intellinews.com