Ideal Stock Balance Saves Industrial Output from Catastrophic Slump

Data released by Rosstat related to industrial statistics (for August) demonstrate a return of stagnation to negative trend – industrial output in the Russian Federation in January-August down 3.2%, and in August down 4.3% in annual terms. At the same time, compared to July 2015, industrial growth amounted to 0.2%.

Unlike the last crisis, the slow rolling present crisis allowed the industry to cut costs and stocks well ahead of time and not pledge for explosive demand growth. In its turn, ideal stock balance reduces feasibility of the industrial output slump.
According to Industrial Optimism Index for July, real sales dynamics is estimated by the large majority of businesses and "decline" even after previous prolonged stagnation which should have taught businesses less strictly estimate demand changes and not every decline deem as "slump". However, at present, accumulated negative changes and information background took their toll: balance of responses in June (rates of demand growth) after seasonal adjustment turned out to be six year minimum (since mid-2009).
To this situation, businesses could not fail to react with their output dynamics. Balance of output adjustment has also (for June) deteriorated sharply and after seasonal adjustment demonstrated reduction against May index by 8 points.
Businesses satisfaction with current demand volume fell. If in early 2015, industry boasted of estimates "normal", then in June the majority of estimates were "below norm". However, not by far: in 2013 and 2014, correlation of these estimates was worse.
At the same time, negative effect of devaluation increased its impact on industry and further puts off economic recovery. Appreciation of imported equipment and raw materials resulted in growth of costs and prices, reduction of demand and output at over than quarter of Russian industry in July 2015, although a year before this effect registered solely 10% of enterprises, report experts.
Positive effect of December 2014 devaluation, reduction of competition with imports, ran out of steam, positive effects of the summer devaluation will be effective over a shorter period of time, meanwhile negative impact of ruble depreciation will be only getting strength.
Sergey Tsukhlo – Head of Business Surveys Laboratory