Russian May Industry Output Unexpectedly Shrank as Slump Spreads
Russian industrial production unexpectedly shrank for the first time in three months, reflecting a slump in foreign demand and weak domestic spending.
Output at factories, mines and utilities declined 1.4 percent in May from a year earlier after a 2.3 percent increase in April, the Federal Statistics Service in Moscow said today in an e-mailed statement. The median estimate of 22 economists in a Bloomberg survey was for a 0.6 percent increase.
Struggling industry suggests sluggish growth is extending into the second quarter after the $2 trillion economy of the world’s biggest energy exporter expanded in the first three months at the weakest pace since a slump ended in 2009, with mining and utilities output contracting on an annual basis. That’s hurt valuations of steelmakers including Evraz Plc (EVR), Russia’s biggest, which has plunged 55 percent this year in London while OAO Severstal (SVST) has lost 42 percent.
“May statistics will probably be among the weakest this year,” Vladimir Tikhomirov, chief economist at Otkritie Financial Corp. in Moscow, said by phone yesterday. There were three fewer working days in the month compared with a year ago, “and it’s very significant for manufacturing,” he said.
The ruble weakened for a fourth month against the dollar in May, the longest stretch of monthly declines in three years, according to data compiled by Bloomberg. The Russian currency fell to 32.52 per dollar on June 11, the weakest level since Aug. 31, before rebounding to 32.0305 at 3:46 p.m. in Moscow.
Russian manufacturing dropped 4.4 percent from a year earlier in May for the biggest monthly decline this year, compared with a 1.2 advance in April, according to the statement. Mining grew 2.3 percent while production at utilities increased 0.5 percent.
Gross domestic product grew 1.6 percent in the first three months from a year earlier, decelerating for a fifth quarter and missing the medium-term target of 5 percent set by Prime Minister Dmitry Medvedev. Exports failed to grow in real terms for an eighth quarter, Economy Minister Andrei Belousov said last month.
Deteriorating domestic demand has taken a toll on carmakers, with sales of new vehicles dropping 12 percent in May from a year ago, according to the Association of European Businesses in Russia. That was the biggest drop since February 2010, according to data compiled by Bloomberg.
May’s data can be explained by the high base effect, with industry surging 3.7 percent in the year-earlier period, according to Dmitry Polevoy, chief economist for Russia at ING Groep NV (INGA) and the second-most accurate forecaster of Russian industrial output in the last two years based on data compiled by Bloomberg.
“It’s like a perfect storm for industrial output,” Polevoy said today by e-mail. “Only June’s statistics will give an accurate picture of reality.”
Lower corporate incomes and profitability led to a “sharp” decrease in income-tax intake in May after four months of increases, Finance Minister Anton Siluanov said yesterday at a government meeting.
“There aren’t too many prospects for recovery,” Vladimir Osakovskiy, chief economist for Russia at Bank of America Corp. in Moscow, said by phone yesterday. “Export demand is stagnating and domestic demand is not really growing.”
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