Data from the Russian statistics service shows that the country is rapidly reducing the production of absolutely everything: from cars and engines to household appliances and cigarettes.
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If Russia defaults on external debt, which occurred for the first time since the Bolshevik coup, did not become a sufficiently convincing sign of the impact of Western sanctions on the Russian economy, new data on the country's socio-economic situation leave no doubt that the Russian economy is gradually falling apart.
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New data from Russia's Federal State Statistics Service shows that production has collapsed in numerous sectors, from automotive to household appliances. In addition, the mood in the retail sector also sank heavily, writes Newsweek. The Russian industrial production index is calculated monthly. This is an indicator of real results in mass production, mining, as well as in the gas industry and power generation. In May, this index decreased by 1.7% compared to the same month in 2021. In April, the fall was 1.6% in annual terms. The mining sector “dipped” by 0.8% in May compared to the same month in 2021, and the manufacturing industry – by 3.2%.
At first glance, these numbers seem rather small. But they speak of a general downward trend that becomes even more evident when one considers Russian production of specific products. The automotive industry was hit the hardest, down 96.7% compared to 2021. Production of trucks fell by 39.3%, diesel and gasoline engines – by 57%. Production of diesel locomotives fell by 63.2%, while freight cars fell by 51.8%.
The French car manufacturer Renault, which controlled the largest Russian plant AvtoVAZ, stopped all operations at the Moscow plant back in March in response to the Russian military invasion of Ukraine. In the end, Renault agreed to sell the Russian assets for a notional sum. Air cargo volumes fell by 86% year-on-year. The rest of the spheres were also affected.
The production of refrigerators fell by 58.1% compared to the level of 2021, the production of washing machines – by 59.2%, electric motors x by 49.9%. Also in Russia, they began to produce 49.7% less TV sets. Production of elevators decreased by 34.7%, and excavators – by 60%. Interestingly, the production of cigarettes also fell by 24.5%.
Russian data shows that retail turnover and consumer confidence have fallen compared not only to 2021, but also to the beginning of the year. Overall sales were greatly reduced due to falling demand from buyers. This may indicate that the real wages of Russians have declined against the backdrop of higher inflation. The same thing happened with real pensions, which decreased by 8.2% in May compared to May last year. Russian real wages fell by 7.2% in April. All these indicators prove that the Russian economy is suffering despite all the news about the strengthening of the ruble after it collapsed heavily in late February. Newsweek notes that the collapse of industrial production in Russia is less than expected by Western economists. But, despite this, the reduction of the real Russian economy is indisputable.
The only unexpectedly good news for the Russian Federation is the situation on the country's labor market. The data suggests that the unemployment rate in May was no more than 3.9%. However, given how inflation is eating into Russian wages, it is unlikely that such high employment will result in an increase in consumer demand and stop the impending recession in Russia.