The real sector of the economy: factors and trends

In January 2013 the macroeconomic dynamics were determined by the influence of factors that emerged in the second half of the previous year. Thus, since September 2012 the trend has been fixed to slower growth of investment in fixed assets and in construction works, and as of early 2013 this trend is widely anticipated to strengthen. The growth of investment in fixed assets in January 2013 amounted to 1.4% compared to the same period last year, in construction works - 1.8% with a decrease in the production of building materials by 2.2%. 

The domestic market in January 2013 was significantly affected by reduced industrial production at 0.8% compared to January of the previous year. The slowdown in industrial production was observed from as of October 2011, together with a reduction in the dynamics of mining and manufacturing production. In comparison with January 2012, the index in minerals extraction amounted to 98.8%, in manufacturing - 99.7% and in the production and distribution of electricity, gas and water - 101.8%.

The sharp slowdown in consumer and investment demand also had an impact on the domestic market compared with January 2012. In January 2013 changes were occurring in the situation of the consumer market. We note that the volume of retail trade and real incomes have recovered to the pre-crisis level (2010). From September 2011 to May 2012 the increase in the activity of the consumer market was influenced by rapid growth of wages and real incomes. In addition, the increased demand in this period was associated with the slowdown in the consumer goods index in the second half the year (and not at the beginning of the year, as before), with regards to prices and tariffs for goods (services) of natural monopolies regulated at the federal level as well as increased consumer lending. However, the situation has changed as of the 2nd half of 2012, when the growth rate of retail turnover gradually declined, although the dynamics of growth of real wages and the demand for loans remained at the same level. In In comparison with the same period of the previous year, the index of retail trade turnover in January 2013 amounted to 103.5% (in January 2012,  at, - 107.4%) including food products - 100.9% (105.2%) and non-food goods - 105.9% (109.4%). The amount of community services in January 2013 compared to January 2012, increased to 5.3% compared with 3.7% a year earlier. The slowdown in growth of retail trade turnover reflects the decline of the consumer confidence index of the population, and is a response to the economic situation in 2012. The population experienced a decrease in the propensity to save and an increase in the cost of purchasing currency. 

A drop in manufacturing activity is mainly due to the low dynamics of demand for investment goods and products of contingent production with regards to construction and building materials, of the metallurgical, chemical and wood processing industries. A decline in the production of machinery and equipment from the previous year was recorded in April 2012 and, as a consequence of these processes, in January 2013, the rate of production amounted to 83.4% from the same period of the previous year. We also note that the beginning of the post-crisis recovery of the machine-building complex is associated with a faster growth of production of transport vehicles and equipment that has fuelled demand for the products of general engineering purposes. The gradual weakening of the growth rates of the production of vehicles was followed by an instability in the dynamics and production of machinery and equipment, and electrical, optical and electronic equipment. 

O.I. Izryadnova – Head of the Structural Policy Department

To find out more see: "The Economic Development of Russia in February 2013".