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Russia December Industrial Output Probably Grew 2 Percent

Jan. 23 (Bloomberg) -- Russian industrial production probably expanded in December at about the same pace reached during the previous four months, showing the economy failed to pick up momentum last quarter.

Output at factories, mines and utilities rose 2 percent in December from a year earlier, according to the median estimate of 17 economists in a Bloomberg survey. That compares with 1.9 percent in November and 1.8 percent in October. The Federal Statistics Service will report the data today or tomorrow.

The world’s largest energy exporter is seeing a stabilization of industrial growth at weak levels as the economy cools, the central bank said this month. Stagnating output may support the government’s calls for monetary stimulus and cheaper money to lift the stuttering economy.

“With the important exception of oil, external demand is weak,” said Jacob Nell, chief economist for Russia at Morgan Stanley in Moscow. “Fears of a return of a second wave of the crisis are keeping domestic consumers and businesses cautious.”

Russia’s economy is forecast to slow to 2.4 percent in the fourth quarter, the weakest pace since a recovery began in 2010, according to the median estimate of 15 economists in a Bloomberg survey. The government should seek to increase growth to a stable 5 percent pace, Prime Minister Dmitry Medvedev said at a conference in Moscow last week.

Bank Rossii removed guidance from its interest rates statement this month, signaling that it may either raise or lower borrowing costs as soon as February, according to First Deputy Chairman Alexei Ulyukayev.

Opposing Views

The central bank doesn’t think monetary easing is appropriate to boost the economy now, while Cabinet officials including First Deputy Prime Minister Igor Shuvalov and Finance Minister Anton Siluanov have called for lower borrowing costs to jumpstart growth.

Sales of cars and light vehicles grew by 1 percent in December compared with a year earlier, down from last year’s high of 25 percent in February, according to the Association of European Businesses in Russia. Sales at OAO AvtoVAZ, the country’s biggest carmaker, were flat in December compared with a year earlier and fell 7 percent during all of 2012, the committee said Jan. 15.

Company Doubts

“Industrial production growth was weak at the end of the year, and the slowdown of corporate lending growth to 13 percent suggests that,” Dmitry Dolgin, an economist at Alfa Bank in Moscow, said by e-mail before the release. “Companies have doubts about the stability of domestic demand and the prospects for global economic growth.”

The price for Urals crude, Russia’s main export blend, has advanced 1.7 percent this year to $111.61 a barrel. The country’s biggest export earner averaged $110.27 a barrel last year, according to data compiled by Bloomberg.

The economy’s “soft patch” probably contained industrial output in December, a trend that will likely remain throughout the first quarter, said Ivan Tchakarov, chief economist for Russia at Renaissance Capital in Moscow.

“Investment has been weak in 2012 because of the political cycle and external uncertainty,” he said by e-mail before the release. “Investment will recover strongly in 2013 as the global backdrop will be better and global economy firmer.”

To contact the reporter on this story: Scott Rose in Moscow at rrose10@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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