Russia industrial production is rising in all eight federal districts

Russia industrial production is rising in all eight federal districts
Russia's industrial production is rising in all eight federal districts
By bne IntelliNews August 14, 2017

​Industrial output growth continued in the first half of this year in all of Russia's eight federal districts (or Okrug in Russian, each district containing Russia 80 regions), according to the Bank of Finland Institute for Economies in Transition (BOFIT).

Russia’s industrial production has been improving this year as the economy starts to come back to life. Russia's industrial output expanded by 3.5% year-on-year in June, according to a report by Rosstat statistics agency on July 17. The figure matched the expectations of analysts surveyed by Reuters and continues the recovery that started earlier this year.

At the same time the manufacturing and services PMI index is also expanding. Russia's manufacturing PMI in July rebounded from a slowdown in June to 52.7, up from 50.3 a month earlier, but the activity in the services sector PMI in July, on the contrary, slipped in July to 52.6, down from 55.5 in June, but remains ahead of the 50 no-change marker, according to Markit Russia Services Business Activity Index published on August 3. Markit Composite Index (covering both manufacturing and services) posted 53.4 in July, down from 54.8 in June and the weakest composite output expansion in ten months.

While industry has stumbled somewhat in July as the Russian economic recovery remains fragile, it is still making good progress. More importantly the recovery is broad-based and all of Russia’s federal districts are improving, according to the Bank of Finland Institute for Economies in Transition (BOFIT).

Production rose by 1.5–2% y/y in the Northwest, Central and Volga Federal Districts, as well as in the mega area of Moscow City and the surrounding Moscow region. In other major federal districts and Saint Petersburg industrial output continued to rise at a 3–4% pace, said BOFIT.

“Over the past couple of years, neither industrial output overall nor manufacturing overall has not contracted in any of Russia's federal districts. Industrial output has even increased briskly in 2015–16 and this year in the Southern Federal District due to high growth in manufacturing and in the Far East Federal District driven by growth in the mineral extraction industries,” BOFIT said in its weekly update.

Retail sales have also turned to growth, albeit slowly, in six federal districts, BOFIT reports. In Russia's Northwest and Central Federal Districts, for example, the volume of retail sales in the first six months of this year rose by just a little over 0.5% y/y. After collapsing in 2015–16, retail sales volumes this year have been similar to levels seen in 2010–12 in the Central, Northwestern, Southern and Volga Federal Districts. The retail sales levels in the Siberia and especially the Ural Federal Districts are at even earlier and lower levels.

Of Russia's over 80 administrative regions, about a dozen in recent years witnessed no contraction or only slight contractions in retail sales to 2013–14 levels.

“Most regions have experienced a fall in retail sales to roughly the same levels that prevailed in the early years of this decade. The retail sales volumes in nearly 20 administrative regions both overall and per capita have sunk to levels similar to those last seen in 2005–08. Among them, Moscow is rather specific as considerable parts of retail sales and also industrial production have over many years moved out of Moscow City to the surrounding Moscow region,” BOFIT reported.