Industrial production and consumption in Russia continue to decline

(Moscow) Industrial production in Russia continued to decline in May after falling into the red in April for the first time since the conflict in Ukraine began, according to figures released by statistics agency Rosstat on Wednesday.

Updated at 12:45 yesterday.

In May, industrial production – an indicator of temperature – fell by 1.7% on a yearly basis. After a very dynamic start to the year, it fell by 1.9% compared to April 2022.

Automobile production was particularly hard hit, with many foreign brands withdrawn from the country and supplies of foreign spare parts halted, forcing many local factories to close.

Auto production in May fell 96.7% over the year and 81.3% over the month.

The mining sector has also toasted, with coal production down 4% year-on-year. In particular, Europe has decided on an embargo on Russian coal from August.

Oil and gas production fell by 3% in one year.

The United States imposed an embargo on Russian oil back in March, despite being a small importer. The European Union has promised to cut its imports of Russian crude oil by 90% by the end of the year.

On the other hand, the production of vodka increased by 3.8% in May and that of sweet wines by 39.3% in one year.

Consumption has also fallen

Consumption in Russia continued to fall in May, falling more than 10% year-on-year as the Russian population faced record inflation coupled with a spate of sanctions heralding lower incomes.

Retail sales, a measure of consumption, fell 10.1% year on year in May but rose 0.5% on a monthly basis, according to data from statistics agency Rosstat released on Wednesday.

Inflation, which exploded to a 20-year high in Russia in April, began falling in May, reaching 17.1% yoy.

The rise in prices has already severely weakened the purchasing power of Russians who have little to save, causing consumption to fall by 9.7% over a year in April.

At the end of May, President Vladimir Putin assured him that inflation would not exceed 15% by the end of 2022, and at the same time announced an increase in pensions and social minima.

Unemployment fell slightly, reaching 3.9% in May from 4.0% in the previous month.

Russia has been hit by several rounds of Western sanctions, including embargoes on key exports, following its military intervention in Ukraine, which it launched on February 24, that have pushed inflation already high since the COVID-19 pandemic.

Authorities are reassuring and promising that the sanctions are unlikely to reach the economy, forecasting that the country should return to growth as early as 2024 after a recession of around 8% this year.

However, economists believe the worst is yet to come in the coming months as the impact of the sanctions will be more visible and felt on Russians’ incomes.

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