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. Last Updated: 07/27/2016

Industrial Downturn Slows, Arrears Fall

Industrial production contracted in September at the slowest pace in 10 months as domestic demand picked up and the global economic recovery spurred demand for raw materials and metals.

Output fell 9.5 percent from a year earlier after a 12.6 percent drop in August, the State Statistics Service said Thursday. Production rose a nonseasonally adjusted 5.1 percent on the month. The median estimate in a Bloomberg survey of 12 economists was for an annual contraction of 12.1 percent and a monthly decline of 2.1 percent.

Wage arrears fell in September by 8.6 percent, to 5.1 billion rubles ($173.2 million) after declining 14.2 percent in August, the statistics service said in the report.

The slump in industrial production, which has been sustained for 11 months, dropped into single digits for the first time since the end of last year. Prices for crude oil have advanced on improved prospects for an economic recovery and metals and coal producers sought to meet reviving demand from manufacturers.

“Car production picked up in September and electricity consumption has also shown a positive trend,” Renaissance Capital analysts said in a report. Economic data last month may show “a moderation in the rate of decline in the real economy.”

The economy contracted a record 10.9 percent in the second quarter after the sharpest economic contraction on record slashed consumer spending and curbed production of raw materials and industrial goods. Oil prices gained 1 percent between July and September, the third quarterly gain in a row.

The Economic Development Ministry raised its forecast for industrial production this year by 1 percentage point, predicting an 11.4 percent decline, according to a report Oct. 1. The ministry expects output to resume growth next year, rising 1.9 percent in 2010, 2.6 percent in 2011 and 4.4 percent in 2012.

Industrial output rose a seasonally adjusted 0.4 percent in the month, compared with 0.2 percent in August, Deputy Economic Development Minister Andrei Klepach said.

“Although we still cannot talk about transitioning to sustainable growth, it’s a substantial growth,” he said. “To ensure that the growth is sustainable we need rather serious changes in financing of the companies, to clear debts and to revive domestic demand.”

The numbers are “further evidence that the economy is beginning to recover,” Goldman Sachs economist Anna Zadornova said in a note. “Industry figures will also get an optical boost from the base effect from November, since Russian [industrial production] plummeted in November last year,” she said.

 (Bloomberg, Reuters)