Russian industry output suffers record fall in Jan

MOSCOW - Russian industrial output contracted by a fifth in January, the biggest monthly fall in the series' seven-year history, according to data on Monday that heightens the risk the economy will shrink more than expected in 2009.

By (Reuters)

Published: Mon 16 Feb 2009, 8:01 PM

Last updated: Sun 5 Apr 2015, 10:23 PM

Slowing demand at home and abroad due to the global financial crisis meant output fell 19.9 percent in January compared with the previous month. It declined 16 percent from a year earlier, steeper than the 11.5 percent drop that had been expected by economists.

"It's a dramatic number, it's like a cold shower in the morning," said Gintaras Shlizhyus, analyst at RZB.

"It increases the possibility of a serious economic slowdown, and of forecasts for (2009) GDP being revised down."

Russia's economy is seen entering its first recession in a decade this year, with the government forecasting a 0.2 percent drop in gross domestic product and analysts expecting a contraction of 0.8 percent.

Manufacturing was the worst performing component of industrial output, falling by a third from the previous month and nearly a quarter from a year earlier.

Companies face reduced demand due to the economic crisis at home, where 1.8 million people have lost their jobs since August, and abroad.

Moreover, the global credit crunch has made it hard to secure fresh funding or refinance old loans, both for the companies and for would-be buyers of their goods.

Ordinary Russians are finding it more difficult to afford new cars, and harder to get car loans. This is leading to factory stoppages and shorter working weeks at key manufacturers, including AvtoVAZ AVAZ.MM and truck maker Kamaz KMAZ.MM.

Production of tyres, cars and buses all fell by 80 percent or more compared with a year ago.

Data out last week showed car sales contracted by a third in January -- a sharp turnaround for a country that had been expected to overtake Germany as Europe's largest car market this year [ID:nLC766828].

Construction-related materials also saw a sharp fall in production, with output of cement down by around 40 percent.

Reflecting the sharp slowdown in output, freight shipments by rail slumped 35 percent year-on-year and Russian Railways monopoly expects freight to be down 20 percent for 2009.

Faced with the worst economic outlook in a decade, the Russian government faces a tough choice between scaling down budget spending and anti-crisis measures after the oil price fall wiped out a third of projected revenues, Finance Minister Alexei Kudrin told Reuters on Monday. [ID:nLF417126]

Analysts say manufacturers may start to benefit later in the year from the weaker rouble.

The currency has lost more than a third of its value versus the dollar RUB in six months, which typically makes domestic goods more attractive than foreign ones.

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