Updated September 16, 2008

   In August, the growth of industrial production grew to 4,7% as compared to 3,2% in July and the dire results of June – 0,9% of growth. The head of the Russian Ministry of Economy Elvira Nabiullina, presenting the preliminary August data within the meeting of the government, declared that "the indices rebound". The economists surveyed consider that the industrial growth equals the indices of trend, and the latter is lower than the industrial growth’s indices of 2007.

   On September, 15, within the meeting of the presidium of Russia’s government, the head of the Russian Ministry of Economy Elvira Nabiullina presented the preliminary August data on the condition of the Russian industry to the colleagues. On September, 16, Rosstat (Federal State Statistics Service) will publish the first official data of the industrial growth, however, the Economy Minister has already declared that "the overall data of the industry development demonstrates the positive dynamic". It is better to remind that in summer, the analysts were speaking about the slowdown in the industrial production. According to the Minister, after in June the growth rates fell to 0,9%, and in July grew to 3,2%, August that is traditionally an unfavorable month for the industry, demonstrated the positive dynamics of 4,7% as compared to August, 2007. Within eight months of this year, the industrial production increased by 5,3%. "The indices of the industrial growth rebound", Mrs. Nabiullina declared.

   According to the data of the Minister, the process sector shows positive dynamics as well: in August, the processing grew by 6,5% (by 4,6% in July), and within eight months – by 7,6%, and the index is higher than the growth of the overall industrial production. Moreover, in August, the mining sector, another problem of Russia’s government lately, grew by 0,7% as compared to August, 2007, and in July it fell by 1,8%.

   The economists surveyed explain partly the August rates growth by "the base effect". Aleksey Morozov from HSBC marks that in August, 2007 the growth rates of the industrial production slowed down significantly (from 10,3% in July to 3,7% in August) and this fact "influenced partly on the results of August, 2008". The economists will not explain the growth rates in the process sector until Rosstat publishes the detailed data on the industrial production for August – Rosstat exactly has fixed the deceleration of the investments’ growth rates in spring-summer. Mr. Morozov links the growth recovery in the extractive sectors with new Lukoil’s field launched in July – Yuzhno Khylchuyu oil field.

   In the meantime, Vladimir Salnikov from the Center for Macroeconomic Analysis and Short-term Forecasting names traditionally the indices of the industry for June and July as "market fluctuations that mean nothing". "According to the data of Rosstat, there is no catastrophe, however, the fall of growth rates is obvious", the economist says. Mr. Salnikov considers that the August growth rates of the industry at the level of 4,7% "resembles the truth, since the growth equals the level of trend".

   The economists explain the fall of the industrial growth by several short-term factors, such as the shortage of employees, the infrastructure limitations, the absence of available production capacities, as well as the acceleration of inflation and the tightening of terms of getting loans. It is better to remind that in July, the investments in the fixed capital reached RUR 730 billion, and the growth in real (inflation adjusted) terms totaled 9,9% as compared to July, 2007. It is the lowest index since the beginning of 2006, and in July, 2007 it equaled 25%. Moreover, in 1H 2008, Rosstat fixed some drop in the real money income of the population living in Moscow and four regions of Russia for the first time during the latest years, and this drop influences on the reduction of consumer demand.

   However, in the opinion of the majority of the economists surveyed, the August data on the industrial production allows speaking about the implementation of the "soft landing" scenario or about the deceleration of growth rates of the Russian economy – 5-6% of the industrial growth forecasted by the Economy Ministry for this year become more and more realistic. Thus, the August data on the industrial production doesn’t cover the consequences of the war conflict in Georgia. Its indirect influence on the industry (through the investors’ assessments of risks) will emerge in autumn. However, now, the influence of the military situation on Russia’s economy is one of the core issues at the meetings of the Russian Union of Industrialists and Entrepreneurs (RUIE) and other enterprise unions with President Dmitry Medvedev.