MOSCOW: Russia’s industrial production fell more than expected in April, data showed Wednesday, suggesting that the sanctioned economy may not have bottomed out yet.
Industrial output fell by 4.5% in April compared with a year earlier, staging its biggest decline on an annual basis since October 2009. Economists’ consensus forecast had envisaged a decline of 1.2%.
The drop in the headline industrial production was mainly driven by the manufacturing sector which fell 7.2% compared with a year ago. Utility production rose 1.8%, while mining declined by 0.8%.
The deep contraction in the industrial production contrasts with the latest data which were better than expected. Russia’s economy shrank by 1.9% in the first quarter, less than economists predicted, appearing to confirm the government’s optimism that Western sanctions and a drop in oil prices won’t cause a deep recession. Leading indicators, such as PMI, also didn’t predict a sharp contraction in industrial production.
The recent report highlights that the risks of a noticeable economic contraction remain in place this year, Renaissance Capital said in a research note.
“The data remind that one should not be too optimistic only because the ruble has stabilized recently. Russia managed to dodge the worst scenario but the overall situation remains difficult,” said Dmitry Polevoy, chief economist at ING Bank in Moscow.
As the ruble became one of the best performing currencies so far this year, Igor Shuvalov, Russia’s First Deputy Prime Minister, said last week that the economy managed to avoid the worst possible scenarios for which the government was preparing.
In the first four months of the year, industrial output declined by 1.5% as the economy slipped into recession on the back of lower oil prices and Western sanctions imposed against Moscow due to its annexation of Crimea and support of rebels in Eastern Ukraine, the data showed.
Russia’s Trade and Industry Minister Denis Manturov said Wednesday that retail sales fell by 6% in January-April after growing by 2.7% in the whole of 2014. Such a drop suggests that consumer demand, the country’s key growth driver, is far from recovering.
Wednesday’s data showed consumer-dependent sectors to be some of the hardest hit in April, car production down 21.9% and textiles down as much as 25%.
