Russian economic trends: The economy is not what it seems (report preview)
Rosstat reported that industrial output was up by a mere 1.1% in January, implying seemingly a rather slow start for the year. Manufacturing, however, expanded by a more impressive 3.9% y-o-y growth, which was on a par with 4Q19 y-o-y growth (the same 3.9%). Mining, power generation and supply of heat and energy contracted in January due to the extremely warm weather in the European part of Russia and should be treated as a one-off effect. Therefore, it would be too early to talk about a sharp deceleration in industry overall. Very strong tax collection in January from the non oil-and-gas sector of the economy (up by 16.7% y-o-y) also hints that amid decelerating inflation, economic activity was not so bad.
Meanwhile, Rosstat suddenly decided to switch to fixed 2018 prices instead of the previously used 2016 prices as a benchmark, meaning that the weights of subsectors in industry have changed, and this change caused a very strong upward revision of 2018 industrial growth. Note that industrial statistics for earlier years have not been revised yet and according to Rosstat will be released gradually over the course of the next few months. Hence, understanding where the economy is heading to and forecasting future trends has become a rather challenging task
A more detailed assessment of Russia’s most recent developments will be published in a day or two.
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