Industry in Russia rose for the first time in six quarters

Industrial production in Russia in the second quarter of 2016 grew in annual terms by 1% — the first growth since the fourth quarter of 2014, follows from the data published by Rosstat. As a result, despite the fall in the first quarter by 0.6% overall for the last half year, the industrial production sector increased by 0.4%.

Growth in the second quarter was recorded in the mining and manufacturing industries — 1.8 and 0.9%, respectively. The level of production and distribution of electricity, gas and water in annual terms in the second quarter has not changed. At the same time over half of the manufacturing industry decreased year-on-year by 0.9% (because in the first quarter, the sector dipped by 3.1%) in contrast to the other two sectors in the first six months increased.

The industry as a whole to adapt to new conditions. In April—may, the index of adaptation of industry (published within the framework of operational monitoring of Ranepa on the basis of estimates of enterprises) reached a historic high of 72% (1994). Largely due to the positive assessments of the demand and employment. In the second quarter, the share of evaluations of demand by industry representatives as “normal” made up 54% against 45% in the first quarter. The share of “normal” estimates of the current number of employees increased from 76 to 80%. The author of the monitoring, head of business surveys Department, center for Real sector Gaidar Institute Sergey Tsukhlo wrote in the June issue that the degree of adaptation of large enterprises is higher than small and medium. For example, in 2016 in the large business satisfaction with sales is 54%, among small and medium businesses — only 24%.

After the decline in GDP in the first quarter by 1.2% (fifth quarter of declining year-on-year) “the lowest point of the downturn in the economy, most likely left behind,” he wrote at the end of June, analysts of the Central Bank, although the economy was not yet on the path of sustainable recovery.” Dynamics of industrial production remains fragile: in may, production decreased with the elimination of the seasonal factor) of 0.3% the previous month, in June rose by the same 0.3 percent, show data of Rosstat. While the Central Bank believes the key to start the restoration industry in General is stabilization of the manufacturing sector, which is still “floats” between the plus and minus.

The coming months may be crucial for processing, according to the index of purchasing managers (PMI) by Markit. The seasonally adjusted Markit PMI index for Russia in June rose to 51.5, the highest values from November 2014 — may level at 49.6. The transition of the index above 50 means that manufacturing returned to growth, said in a release from Markit on 1 July. “Last June was for the Russian manufacturers is one of the most favorable months for almost two years,” commented Markit economist Samuel Agassi.

However, judging by the already received IEP data for July, the emerging trend of growth will not continue. It seems that in July or even in the second half of the year the dynamics of output is not positive, says Sergey Tsukhlo. The same applies to the investment plans of industrial enterprises, he adds, ” in July, they again went on the decline.

The main problem of the industry, according to experts, there remains a lack of demand. But the situation is somewhat improved due to the strengthening of the ruble. The low exchange rate means expensive imports (equipment, raw materials, components), and in July about this issue, mentioned only 13% of respondents, although in the beginning of the year, in January, the figure was at around 36%.