How Capacities are Utilized in the Russian Economy

A few factors contributed to that. First, that important index of industrial statistics is represented incomprehensively in official publications and for the above reason it was not used much in the analysis. Second, some international institutions believe that the Russian industry works at its maximum capacity and measures aimed at stimulation of demand in industrial output are dangerous.



According to the data of IEP, in 2013 utilization of capacities in the Russian industry in the 1st quarter fell to 64% which is a normal seasonal dip of the index, but in the 2nd quarter it rose only to 67%. In the previous years, a drop in utilization of capacities in January was not so high, while a recovery in April was a more substantial one. The above data can be assessed differently taking into account stagnant growth in the economy early in 2013. Let us evaluate it with taking into account the maximum possible utilization of capacities.

Direct evaluation of the latest index point to the fact that at present the Russian industry is ready (that is, without making of investments) to bring utilization of capacities in normal operation (that is, with all the required maintenance and repair procedures in place) in production of competitive products (that is, products which can be sold on the domestic market) to 82%. Consequently, the reserve of unutilized capacities generally amounts to 15 p.p.

However, by industries reserves of capacities may differ significantly. If in the food industry they amount to 20 p.p. (that is, virtually the one-fifth of the equipment idles there), in the light industry and the forest industry growth in load is feasible by 8 p.p. and 9 p.p., respectively. Reserves of growth are also high in the iron and steel industry (18 p.p.), engineering (16 p.p.) and building industry (14 p.p.).

 

The current level of utilization of capacities can be supplemented by another index, that is, availability of orders by the month. The above index shows during what period in future the Russian industry is provided with orders. The IET has been collecting the data on availability of orders for over 20 years.

 

The results of monitoring of the past few quarters point to a sharp drop in availability of orders in the Russian industry from mid-2012 when the risk of the second wave of the crisis was very high. In its response, consumers of the industrial produce reduced the volumes of their orders and switched over from long-term orders to short-term ones. Such a situation still remains: in January growth in orders which is typical of the beginning of the year did not take place, while monitoring in April showed that the index remained at the crisis (2009) level. So, for four quarters running stability of operation of Russian industry has been too low, while its vulnerability to external shocks, too high. As a result, even a small negative impact may result in a drop in industrial output.

 

S.V. Tsukhlo, PhD (Economics), Head of the Business Surveys Laboratory