Russia: Industry’s rates continue to fall despite fluctuation of mood

In April, as compared with March figures, the drop in industrial output accelerated by half to 4.5% in annual terms, the Russian Statistics Service reported yesterday. For a while, only the Government optimism can destroy the downturn in the industry: moderate industrial recession is likely to last at least until the fall of 2015, there are no reasons for the subsequent strong recovery of the production.

In fact, the fall in the output in industries, oriented to domestic demand, began in March 2015. In April, the mining industry, which provides the construction industry with raw materials, joined this trend and the reduction in production of consumer and capital goods sharply increased the overall decline in the sector - in March it was only 0.6%.

Analysts and officials of the economic block of the Government expected very different figures from the industry in April. Stabilization of the financial markets in March, slowing inflation (and the weakening of inflationary expectations – the Central Bank announced yesterday that in April they continued to decline, despite the consistently high inflation), strengthening of the ruble allowed the economy to stock up the next portion of optimism. It was reflected not only in winning rhetoric and expectations of growth, but also in the attitudes of companies and analysts' forecasts. In any case, the forward-looking industrial indicators of Rosstat, HSBC and Gaidar Institute for Economic Policy even improved in April 2015 - and clearly pointed to the rising expectations of at least about the prospects for the current production. The deepening decline in the production of capital goods only reflected the index of PMI, but even authors of this study recorded "a moderate growth in production volumes against the background of increasing reduction in new orders" in April.