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. Last Updated: 07/27/2016

January Industrial Output Up 7.8%

Industrial production expanded in January for a third month, the State Statistics Service said Monday, signaling that a recovery in domestic demand may help tug the country out of last year’s record economic downturn.

Output at factories, mines and utilities jumped 7.8 percent, the biggest increase since April 2008, from a year earlier after a 2.7 percent gain in December, the service said. Nonseasonally adjusted monthly output fell 20.4 percent in January, which began with a 10-day holiday period.

Growing exports, government stimulus spending and companies’ efforts to stabilize inventories stoked a factory rebound after output contracted for 12 consecutive months after October 2008.

“The recovery will be largely linked to external demand, but domestic factors are becoming more prominent,” said Olga Naidenova, an economist at Otkritie Financial, before the release. Government spending late last year and its anti-crisis program, which reached 1.2 trillion rubles ($39.7 billion), helped boost output in January, she said.

Manufacturing expanded last month for the first time since September as new orders increased and companies fired staff at a slower pace, according to VTB Capital’s Purchasing Managers’ Index. The domestic market was a “key driver” of demand as new export orders expanded “only marginally,” VTB said.  

Industrial production may expand 2.8 percent this year, and fixed capital investment may rise 2.9 percent, the government said in a Dec. 30 report. Output shrank 10.8 percent in 2009, and capital investment fell 17 percent, the statistics service said.

Improving global sales, higher prices for raw materials and leaner inventories are prompting companies including coking coal producer Raspadskaya to raise prices and Rosneft to ramp up production. Russian Railways, the rail monopoly, said average daily cargo volumes climbed 17 percent in January from a year earlier.

Rail cargoes may rise 3.7 percent this year after tumbling 15 percent in 2009 from the previous year, Russian Railways chief executive Vladimir Yakunin told Prime Minister Vladimir Putin on Feb. 3. Railroads account for about 85 percent of Russia’s cargo transport, excluding pipelines.

The pickup in industrial output has yet to boost hiring. Manufacturers cut jobs for a 21st consecutive month in January even as the rate of job losses was the second slowest in the past 17 months, according to VTB Capital’s purchasing managers index. The jobless rate rose in December to 8.2 percent from 8.1 percent in November.

Wage arrears jumped 15.5 percent in January after a 29.4 percent drop in December.

Lending to companies declined 0.3 percent in January as banks curtailed loans on concern that borrowers won’t be able to repay debt, the central bank says. The bank has cut interest rates 10 times between April and December to spur lending.