Russia February Industrial Output Down More Than ForecastOtt Ummelas and Scott Rose
Russian industrial output shrank in February, contracting the most in more than three years and highlighting risks to the economic outlook as mining and utilities production weakened.
Output dropped 2.1 percent from a year earlier after a 0.8 percent contraction in January, the Federal Statistics Service in Moscow said today in an e-mailed statement. The median estimate of 19 economists in a Bloomberg survey was for a 1 percent contraction.
Two consecutive months of shrinking industrial output underscore the case for monetary stimulus as President Vladimir Putin’s aide Elvira Nabiullina, a former economy minister, is set to take charge of the central bank in June. Declining commodities prices, restrained business investment and cooling household spending are making it harder for companies like OAO Mechel, Russia’s biggest maker of steelmaking coal, and carmaker OAO AvtoVAZ to expand sales.
“The accelerating decline in industrial production amid continued high inflation is a fairly alarming signal for the economy,” Ivan Sinelnikov, an analyst at OAO Gazprombank in Moscow, said in a note. The data should send a “clear signal” to monetary authorities that interest rates should be cut soon, he said.
The Micex Index of 50 stocks fell 2.2 percent, the biggest drop since Nov. 13, to 1,462.82 at the close in Moscow. The ruble weakened 0.6 percent against the dollar to 30.8325 amid speculation over risks from a plan to force losses on Cypriot bank depositors.
Nabiullina is preparing to replace Chairman Sergey Ignatiev, who’s frustrated calls by Putin’s government to ease borrowing costs. Putin has made economic expansion a priority for his third term, with Prime Minister Dmitry Medvedev setting a long-term growth target of 5 percent a year.
The economy of the world’s largest energy exporter expanded last year at the weakest pace since 2009 as Europe’s debt crisis and a slowdown in China sapped demand for its commodities. Bank Rossii, faced with the fastest inflation in 18 months, left borrowing costs unchanged for a sixth month last week, saying market rates were acceptable.
Mining contracted 2.2 percent after a 1.2 percent drop in January, the statistics service said. Output at utilities fell 10 percent after a 1.8 percent gain the previous month, while manufacturing fell 0.1 percent, improving from a 0.3 percent decline. Gross domestic product increased 1.6 percent from a year earlier in January, compared with 2.4 percent in December.
Strong increases in February last year were the “key drag” in the year-on-year comparison, Dmitry Polevoy, chief economist for Russia and Kazakhstan at ING Groep NV, said by e-mail. “In March we will likely see better readings.”
Sales of cars and light vehicles grew by 2 percent last month from a year earlier, down from last year’s high of 25 percent in February, according to the Association of European Businesses in Russia.
Industrial production may resume tepid growth in the coming months as the unfavorable comparison with a year earlier fades and domestic demand grows slowly, according to Vladimir Miklashevsky, an economist at Danske Bank A/S in Helsinki.
“Russian economic growth is smoldering,” he said by e-mail today. Without growth in investment, industrial production isn’t likely to get much of a “push,” he said.