The Russian industry’s dichotomy: manufacturing flat, mining down y-o-y in 9m20

RUSSIA ECONOMICS - In Brief 16 Oct 2020 by Alexander Kudrin

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Rosstat reported that the industrial production was down in 3Q20 by 5.0% y-o-y, while in 9m20 it was down by 2.9%. Y-o-y contraction was deeper in 2Q20 (-6.5% y-o-y). It was mostly mining which held the industrial growth in the negative area, as OPEC+ deal had a strong impact on oil volumes. In 3Q20 and 9m20 mining was down by 11.5% and 6.5% y-o-y respectively. The latter figure looks better as in 1Q20 growth was still positive. Manufacturing was flat y-o-y in 9m20, but it was down by 0.4% y-o-y in 3Q20 and by 5.1% in 2Q20.Note, that these figures are based on the revised historical data as Rosstat revised industrial statistics for 2019 and 2020, which is not unusual. As was repeatedly mentioned by GKEM Analytica in the past, statisticians are in principle unable to capture all structural changes if they occur in the economy in a relatively short time frame. It looks as though it is happening in Russia again as always happened in the past at times of external shocks.Overall, the country’s industrial performance doesn’t look bad given the current circumstances. If to assume that there will be no major lockdowns in the country’s regions in the next months, then annual industrial growth figures should not be very different from the aforementioned 9m20 data. A growing number of newly contaminated people will somehow suppress economic activity in 4Q20 and catching up with the pre-pandemic trend will be delayed in manufacturing, while OPEC+ deal will hold the oil extraction business at bay.Meanwhile, industrial statistics illustrate that the recovery in manufacturing continued to remain highly uneven, which indicates that the aforementioned structural changes take place. The...