Fuel Power Ferrous Chemistry metallurgy materials metallurgy Mechanical engineering engineering Non-ferrous Forestry & Construction Light industry Food industry Woodworking The recovery of the world economy and favorable external business situation accounted for growth in output of export oriented industries in January through August of 2002 (105.2 %). Non-ferrous metallurgy (109.8 %) and fuel industry (106.1 %) demonstrated the most rapid rates of growth among the industries of this complex.
However, even outpacing rates of growth of export oriented industries in comparison with the dynamics of industrial production could not overcome the intensifying trend towards a decrease in the volumes of export.
In June of 2002, exports accounted for 23.5 % of the total sales of industrial output as compared with 28.5 % and 32.4 % registered in the respective periods of 2001 and 2000. The development of this trend takes place at the background of intensive increase in competing imports. In January through July, the growth of imports in comparison with the figures observed in the respective period of the preceding year made 9.7 %, while industrial output increased by 3.9 %.
This year, the consumer sectors oriented towards the domestic market demonstrated the fastest rates of development. The production indices related to the consumer and investment complexes made 107.3 % and 103.0 % respectively as compared with the figures observed in January through August of 2001.
The saturation of the consumer market is stable and answers the household effective demand. In January through August of 2002, the share of food products in the structure of retail trade turnover increased by 0.p. p. as compared with the figures registered in the respective period of 2001. The growing demand for domestic goods resulted in a 8.1 % increase in the output of food industry. Besides, the dynamics of production in June and August were positively affected by the correcting decrease in import of foodstuffs. In the 2nd quarter of 2002, the share of imports in the total amount of the stock of food resources decreased by p. p. in comparison with the figures observed in the preceding quarter and made 32 %.
In January through August of 2002, the output of light industry stabilized. However, the situation of the industry is still difficult. The influence of imports grows due to the low competitiveness of domestic goods.
According to estimates, in the 2nd quarter of 2002, the share of imported goods in the total amount of nonfood stocks of retail trade increased by 6.5 p. p. as compared with the figures registered in the preceding period.
The structure of production in the investment complex is formed at the background of outpacing rates of growth in the industry of construction materials initiated by the acceleration of rates of housing construction.
The output of construction materials increased by 4.5 % in comparison with the figures observed in January through August of 2001, while the commissioning of housing grew by 14.6 %.
The output dynamics across individual branches of mechanical engineering have fluctuated rather significantly. This year, the trend towards the outpacing rate of growth in motor industry (103.8 %) as compared with the output dynamics of mechanical engineering (102.8 %) recovered again. Intensive growth in communications services occurred against the background of the persistent high rates of development of the communications industry (166.0 %) and corresponding branches.
At the background of the current trend towards a decrease in the output of machine tool construction and base technological equipment, the gap between the rates of growth in domestic mechanical engineering and import of machinery and equipment widens. In January through August of this year, the increase in the import of mechanical engineering products made 20.0 %, while the respective domestic production grew by 2.8 %. Since the capability of domestic mechanical engineering to meet the growing demand for new equipment answering the modern technological level is limited, the share of expenditures for purchase of imported machinery and equipment in investment is systematically increasing. In the first six months of 2002, the expenditures for purchase of imported machinery and equipment made Rub. 48.1 billion, or 24.9 % of the total amount of investment in machinery and equipment.
Besides, this year the dynamics of mechanical engineering is significantly affected by the falling investment demand on the part of export oriented branches of the metallurgical and fuel and energy complexes. Since the system of inter-branch links is well developed, this factor has affected the intensity of processes of reproduction of the active portion of capital in the economy, as well as the output dynamics of construction materials in branches of ferrous metallurgy, chemistry, and woodworking.
Figure 2. Changes in the structure of balanced financial result in January through July of 2002, in % of the preceding period of 4,2,0,-2,-4,-6,-8,In the course of an analysis of short term perspectives of industrial development, the downfall of proceeds of industrial enterprises shall be taken into account. Since the beginning of the year, the dynamics of profits across all sectors of the economy have been characterized by a steady decrease in rates from 83.9 % in January to 65.9 % in January through July as compared with the figures registered in the preceding period, while this indicator in industry has declined from 109.2 % to 57.9 % respectively. In January through July of this year, the balanced financial result made Rub. 436.3 billion, including Rub. 203.9 billion in industry. The rate of profit in industry declined to 4.7 % as compared with 10.0 % registered in January through July of 2001 and 18.0 % in the respective period of 2000.
A factor behind the decreasing profit rates in industry was a growth in production costs resulted from an increase in wholesale prices of and tariffs on consumed material resources, while producers’ prices in industry went up more slowly and the rate of growth in wages and salaries outpaced the dynamics of prices of final products and real Ruble appreciation.
In the case this trend persists, it will be rather problematic to expect that the investment surge, which, in fact, is the major potential generator of growth, will continue. At the same time, it shall be noted that according to the results of the first six months of 2002, the share of depreciation in the composition of investment resources has increased. This trend reflects the shift in priorities and motivation of the economic activity. Domestic entrepreneurs associate the prospects of expansion and maintenance of their positions on the domestic and foreign markets with the intensification of processes of technical re-equipment and modernization of production.
O. Izryadnova IET Business Survey: Industry In September, the intensity of growth in effective demand further increased by several points and reached the level registered in the autumn of 2001, when there was observed the highest rate of growth of this indicator for the last two years. Therefore, the preceding quarter has proved to be the most favorable period for the Russia’s industry in year 2002. By September, the growth in cash sales has recovered across all industries, except light industry. At the same time, the beginning of a decline in cash sales in construction industry may be explained by the near close of the construction season. The growth in normal sales observed for three months running has somewhat improved the appraisals of amounts of effective demand. The share of responses “normal” has increased up to 39 % and is the best evaluation in the last 11 months. Metallurgy (70 %), chemistry and petro-chemistry (64 %) accounted for the majority of such responses.
The positive evaluation of effective demand has affected only barter transactions so far. In September, the amount of barter in the Russia’s industry declined by 4 points faster than in the preceding month. However, the September results are below the most rapid rates of decline registered in late 2001, not to mention those Fuel Trade Industry Power Transport engineering Construction Other industries Communications observed in late 2000, by 9 to 15 points. At the same time, the dynamics of promissory note and offset transactions again look rather alarming. The recent decline in these deals has slowed down. The September balance (the intensity of change) made only –1 % after –7 % registered in August. However, the absolute growth of these indicators was observed only in mechanical engineering and light industry.
According to enterprises’ evaluations, the sales of both domestic and imported goods increased in the 3rd quarter. It shall be noted that the intensity of growth in sales of domestic products (+5 %) exceeded the intensity of sales of similar exported goods (+3 %). In the preceding quarter, there was registered an opposite situation: -1 % for domestic enterprises as compared with +2 % for exported products.
The growth in cash sales allows Russia’s enterprises to increase output more and more intensively. In September, the balance of change in production further increased by 5 points. The growth of output took place across all industries with the exception of food industry, construction industry (the seasonal factor) and non-ferrous metallurgy.
The increase in demand observed in August through September has “outweighed” the growth in output – the excessiveness of the stocks of finished goods declined by 7 points. Enterprises have used a portion of finished stocks at their warehouses to meet new orders maximally fast (and without an additional burden on production capacities). The lack of stocks preventing this strategy persisted in metallurgy, forestry complex, and became noticeable in food industry.
The rates of decline in real profits decrease for the fourth month running. The balance of change of this indicator in September remained negative, i.e. profits of the Russia’s industry continues to decline. However, the intensity of decline gradually decreases. In September, an absolute increase in profits was registered only in ferrous metallurgy and light industry.
Although forecasts of enterprises concerning changes in effective demand lost several points of optimism in September, the expectations of a growth in cash sales still prevail across industries. The most optimistic are estimates in ferrous metallurgy and mechanical engineering. Only in the industry of construction materials a decline in effective demand is expected.
The forecasts concerning changes in barter have “gathered” a few points of pessimism and have reached the level of the most intensive decline in the last 20 months. Barter will decline across all industries except chemistry, petro-chemistry, and food industry.
The estimates of changes in the amount of promissory note and offset transactions demonstrate the minimal (+ 1 %) expectations of growth. A decrease of such transactions is possible only in the forestry complex, light, and food industries.
The declining optimism with regard to sales, the reluctance to use barter, and minimal hopes related to promissory notes and offsets accounted for negative changes in production plans. In September, the balance of expected changes in production fell by 11 points. However, the persistence of positive values of this indicator is an evidence of the fact that plans involving the expansion of production prevail across the Russia’s industries. In the short run, the absolute decrease in output is possible only in the industry of construction materials (due to the seasonal factor).
S. Tsukhlo Oil and Natural Gas Sector In 2002, the development of oil and natural gas sector is characterized by the persistence of the trend towards increasing production of oil and oil products formed in 2000 through 2001. In January through August, the total volume of oil output increased by 8.3 % in comparison with the figures registered in the respective period of the preceding year, while the output of primary processed oil increased by 1.7 %. For the first time in the last years, there was registered an increase in extraction of natural gas (see Table 1). At the same time, due to a certain surplus of oil output and decreasing world oil prices in late 2001 – early 2002 (in the 4th quarter of 2001 and in January through February of 2002, the average world price of Russian oil was at US $ 18 to 19 per barrel), there was observed a significant dip in investment activity: in January through July of 2002, the volume of production drilling fell by 16.5 % as compared with the respective period of the preceding year, while surveying drilling decreased by 39.1 %. The commissioning of new oil wells was down by 13.1 %. The degree of processing of oil in the oil processing industry decreased from 70.9 % in January through July of 2001 to 69.9 % in the respective period of this year. The share of high octane gasoline in the total amount of motor gasoline increased from 44.5 % in January through July of 2001 to 48.% this year.
Table Oil, oil products, and natural gas output, in % of the respective period of the preceding year 1999 2000 2001 January - August Oil 100,3 105,9 107,7 108,Gas condensate 104,7 103,8 106,7 111,Primary oil processing 102,9 102,7 103,2 101,Motor gasoline 102,2 103,6 100,6 102,Diesel fuel 104,2 104,9 102,0 103,Furnace fuel oil 94,8 98,3 104,2 105,Natural gas, cub. m. billion 99,7 98,5 99,2 103,Oil gas, cub. m. billion 103,2 102,5 105,0 105,Source: RF Goskomstat.
After a period of decrease in domestic oil and oil products prices taking place in 2001 and early 2002, in the past months the increasing production costs and growing world prices affected the dynamics of prices of oil and oil products on the domestic market. Since April, there has been registered a stable increase in domestic oil prices (both in Ruble and US $ terms), since May, there was observed also a growth in the price of motor gasoline. In the last few months, prices of natural gas were practically at the pre-devaluation level (see Table 2б Fig. 1, 2).
Table Domestic oil, oil products, and natural gas prices (in US $) in 1999 through 2002 (average wholesale prices of enterprises, US $ / metric ton) 1999 2000 2001 2002 2002 2002 Dec. Dec. Dec.
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