Industrial growth is sandwiched between prices and demand

Leading indicators suggest that after a halt in April (see chart) in May, industrial output is unlikely to pick up growth. According to the market research of the Gaidar Institute (IEP), in May the industry kept its output growth at the April level (we recall that the Federal State Statistics Service, taking into account the seasonality, estimated the growth of industrial production in April to March 2021 at zero). The forecasts for the release from the beginning of 2021 show stable optimism. “For almost half a year, enterprises are ready to spin the flywheel of sustainable industrial growth. This desire is supported by both positive forecasts of demand and a lack of stocks of finished goods. Note that the forecasts for changes in output at the enterprise level became positive already in May 2020 – the industry was more than ever ready to demonstrate the same “rebound from the bottom” of the crisis, “the study author Sergei Tsukhlo believes.

At the same time, estimates of finished goods inventories declined again in May, indicating an increase in their deficit – which is rather a sign of uncertainty, despite the high level of optimism in expectations – strong growth is usually accompanied by a moderate managed surplus of inventories. In addition, demand for the companies’ products is growing more and more slowly, although dissatisfaction with sales (28%) is at its lowest since 2007.

The slowdown in sales, however, while the industry compensates for the current and hopes for the expected rise in prices – it is not clear how soon the search for equilibrium will be completed in the sector. The price factor, as both Rosstat and analysts admit, has become one of the main factors working in favor of increasing output (see Kommersant of May 25). In May, industry inflationary expectations, according to the IEP, increased by another 8 points, broke the last record of the 21st century (July 2008) and reached the post-default plateau of October 1998 – October 2000. Then the price forecasts for the industry were steadily in the range of plus 38–47 points with an average value of 44 points. This is exactly the result that was obtained in May 2021. “It looks like another record is next in line – the post-default peak registered in September 1998, when the balance of price forecasts reached plus 53 points. Let’s hope that things will not reach the records of 1993 and 1995, ”concludes Mr. Tsukhlo.

Alexey Shapovalov