Recession Ceases In February the dynamics of sales was not subjected to considerable changes as compared with January: the demand is still lowering, and lowering quite intensively, but not as intensively as in November-December 2008. The frequency of the reports on the reduction of sales has reduced to 41%, whereas in three preceding months there were steady 63% of such replies. 465 of the enterprises have reported that the volumes of sale have not changed since January, which is also the best result for the period under consideration. The growth of output has been registered at 115 of the enterprises. As a result the balance (growth-reduction) went up to – 30 points after -62…-59 points in the preceding months. Upon exclusion of seasonality the rates of demand deceleration (the balance of change) makes -33 points, which is also better than the figures of the preceding months upon exclusion of seasonality (–51…–45). In all branches of industry, excluding the foodstuffs production, construction and light industries, the demand has been lowering at lower rates.
However, according to the estimations of the volumes of sales, the enterprises counted on a better dynamics of the demand (less intensive decrease) in February. The satisfaction with the demand has lowered by 21%, which has been the worst (minimum) figure since May 1999. The proportion of “below the norm” responses has increased in all branches of industry, except timber processing, chemistry and petrochemistry. The dissatisfaction with the demand is especially low in ferrous metallurgy (100% of enterprises), construction industry (96%) and light industry (88%).
After a dramatic drop in November the forecasts for the demand, upon exclusion of seasonality, do not change for the fourth month in the row. The initial data though demonstrate the obvious abatement of pessimistic views in the industry: whereas in November-December the forecast decrease rates (balance) of the demand made -50 points, in February it reached the level of -1 point, that is the enterprises on the whole predict the stabilization of the sales volumes in the forthcoming months. As to metallurgy, chemistry and petrochemistry, they expect a pronounced increase in the demand. A similar explicit increase is forecast in the light industry, and less pronounced – in the machine-building.
Output and Prices Stop Falling In February the industrial production continued to fall though obviously not as intensively as in January 2009 and by far less intensively than in November-December 2008. The initial data of the February survey demonstrated suspension of the output decrease in the Russian industry: the proportion of the reports on the decrease of the output became equal to those of its growth. In February the total rates of the output decrease are lower (that is better) than those of November-December by times. As to ferrous metallurgy, chemistry and petrochemistry the output balances (growth rates) became positive, the production starting to grow. It is in the foodstuffs production, construction industry and light industry where the highest rates for the output decrease were observed in February. The ex clusion of the seasonality demonstrates but the slow-down of the recession. Only metallurgy does demonstrate the growth in the output upon exclusion of the seasonality.
The production plans of the enterprises also testify the intention (attempts) to get out of the crisis “well” of November-December. In February the balance of the initial forecasts became positive and returned to the level of August 2008 when the crisis had just started to affect the industry. As compared with January the forecasts have improved by 20 points. The initial balances became positive in all branches of industry, except the light and the construction industries. Exclusion of seasonality smoothes the optimism of the initial February balances to the moderate pessimism (-5 balance points after -13 balance points in January and -20 in November).
The price policy of the enterprises has also started to change. In February the sale prices continued to decrease but with the most moderate rates of last four months, which is but evident only upon the exclusion of seasonality. The initial data demonstrated zero increase in prices in February. The biggest part of the enterprises, the same as at the beginning of the year, prefers not to change its prices. The prices decrease in absolute terms only in ferrous metallurgy, chemistry, timber processing and construction industry. The foodstuffs production, non-ferrous metallurgy and the light industry have already abolished this policy, and the machine-building is about to join them. The price plans of the enterprises give further evidence for the cessation of the deflation policy at the enterprises. All the calculated balances demonstrate the intention to change to the increase in prices in the forthcoming months. Only timber industry and construction industry are likely to become the exception.
The load of facilities demonstrates that in the first quarter of 2009 the Russian industry has shrunk considerably even when compared with the fourth quarter of 2008. Whereas in October, when this quarterly question was asked last time, the facilities were used to 70%, at the beginning of the new year this figure dropped to 53%. There has not been such a drastic fall over one quarter through the period of the IET surveys. The situation is most difficult in the machine-building (45% versus 67% last quarter), construction industry (also 45% versus 69%) and chemistry and petrochemistry (47% versus 64%).
Commodities Stocks Become Stable, Credits – More Available Since December the estimations of the stocks of the finished goods have stabilized at a relatively, but not exceptionally high level for the last 17 years. The excess of the goods was nearly twice as high in 1994, approximately the same at the end 1995 – the beginning of 1996, and four times as low before the default of 1998. Obviously the enterprises did not expect such a sudden fall in the demand in November 2008, but by sharp correction of prices and output they managed to escape the catastrophic stocking of their storehouses. In February 2009 the estimations of the stocks have worsened considerably only in chemistry and petrochemistry. As to other branches of industry, they either have not changed or have improved.
Positive shifts have occurred in the crediting of the industry by the banks. In February 28% of the enterprises can already afford taking credits from the banks. The growth of the figure, as compared with the recent absolute minimum (December 2008) made 11 points. The banks are primarily ready to credit the foodstuffs industry (of which 41% of enterprises estimate the credit availability as normal), metallurgy (38%) and machine-building (30%).
Foreign Trade N. Volovik The worsening of the situation at the world market and the drop in the internal solvent demand have resulted in the considerable decrease in the main indices of the Russian foreign trade in 2008. The foreign trade balance reached the figures that had been minimum since July 2003. In order to support the domestic producers of the mineral fertilizers the export duty rates for nitrogen, mixed and phosphorus fertilizers.
The World Trade Organization is of the opinion that the measures introduced by some countries to diminish the crisis may in fact complicate working the way of the world economy out of the recession.
Throughout last ten years at the end of the year the figures of Russian export and import reached their peak values. The recession of the world economy suspended this trend. Russias foreign trade turnover calculated on the basis of the balance-of-payments methodology made USD 52.4 billion in December 2008, which is by 17.4% less than in December 2007 and by 31.4% less than in July 2008, when the main indices of the Russias foreign trade reached their maximum value over the whole period of observations.
2000 2001 2002 2003 2004 2005 2006 2007 Balance Export Import Source: Central Bank of the Russian Federation Fig 1. Main Indices of Russia’s Foreign Trade (as USD billion) In December the export volume contracted to the lowest figure of 2008, making USD 28.5 billion, which is by 26.1% below the similar figure of the corresponding figure of 2007. it should be noted that the export to CIS countries was reducing at faster rate, by 31%, making only USD 3.9 billion. Export to non-CIS countries made USD 24.6 billion, which is by 25.3% below the figures of the previous year.
The main reason for such a drop lies in the worsening of the situation at the world commodities market as a result of the slow-down of the world economys growth rates and the contraction of the world demand for fuel and raw materials. In December 2008 the prices for the main goods of the Russian export – oil, coal, non-ferrous metals, reinforcing steel, some kinds of mineral fertilizers and rubber continued to decrease.
As compared with November 2008, in December 2008 the price for oil grade “Brent” lowered by 25.2%, and as compared with December 2007 – by 52.8%. As to oil grade “Urals”, in December its price was only USD 37.7 per barrel. On the whole, the price of the OPEC basket dropped to USD 40.14 per barrel. The oil has not been that cheap since February 2005.
The average price of the Russian oil as monitored from January 15 to February 14, 2009 was at the level of USD 43.16597 per barrel. Basing on this price the export duty rate for oil will be USD 115.per ton starting with March 1, 2009. Thus, for the first time over the last four years there will be the increase in the oil duty rate occurring, which is connected with the stabilization of the prices for oil.
The export of export duty rate for oil products will increase simultaneously: from USD 80.3 to USD 90 per ton for light oil products, and from USD 43.2 to USD 48.5 per ton for dark oil products.
In December 2008 the average monthly price for aluminum had been observed to decrease for the sixth month in the row, dropping below the psychologically significant point of USD 1500 per ton.
The decrease in the price for this metal in August-December 2008 was accompanied with the fast increase in the stocks reserves at London Metal Exchange (LME): from 1.2 million of tons at the beginning of August to 2.32 million of tons by the end of December.
The price for copper had also been dropping for the sixth month in the row. Copper quotations fell below the level of USD 3000 per ton by the end of 2008. The decrease in prices at the copper market Ma Ma Ma Ma Ma Ma Ma Ma Ma Jan Jan Jan Jan Jan Jan Jan Jan Jan Sep Sep Sep Sep Sep Sep Sep Sep Sep was observed against the background of the sharp increase in the stock exchange reserves. Thus, reserves of copper at LME were 230.65 thousand of tons by the end of October, and 291.2 thousand of tons by the end of November, making already 339.77 thousand of tons by the end of the year. In such an uncertain situation at the market the customers of the physical metal have contracted the volumes of purchase and there has not been renewed interest in the metal.
The world market of nickel has been slackening since March 2008. Stocks of nickel at LME are growing. By the end of December 2008 they had reached 78.39 thousand of tons, whereas even at the beginning of December their volume was 57.85 thousand of tons. Such a fast growth of the stock reserves resulted in the acceleration in the drop of the metal quotations at the market. In December the average monthly price for nickel reduced as compared with the corresponding month of 2007 by 62.7%, in November the relative decrease was 34.9%. Thus, in the last months of 2008 the rates of the decrease in prices for nickel remained high and went up steadily.
Table Average Monthly World Prices in December of the Corresponding Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Oil (Brent), USD/barrel 11.5 24.1 25.6 19.0 27.48 29.51 39.6 56.4 63.1 90.64 42.Natural gas, USD/1 mln BTU 2.251 2.558 8.713 2.694 4.873 6.469 6.983 8.87 7.353 7.228 5.Petroleum, USD/gallon 0.3739 0.6986 0.7649 0.5398 0.836 0.889 1.141 1.875 1.638 2.353 0.Copper, USD/ton 1601.6 1748.1 1914.4 1528.7 1618.6 2187.8 3137.0 4578.0 6643.9 6580.5 Aluminum, USD/ton 1305 1470.7 1562.5 1346.3 1376.2 1553.8 1850.0 2248.0 2816.9 2380.2 1490.Nickel, USD/ton 4202.0 7984.2 7315.4 5219.5 7255.0 14060 13792 13423 34578 26003 9686.Source: calculated on the basis of London Metal Exchange, International Oil Exchange (London) In December 2008 the import made USD 23.9 billion, which is by 3.6% below the figures of December 2007. There were goods worth USD 23.9 billion imported from the CIS countries (decrease of 24.6%), those worth USD 21.6 billion imported from the non-CIS countries, which is 0.7% below the figure of December 2007. this contraction is primarily connected with the decrease in the purchase of the machine-building production by 7.0% and of chemical commodities by 5.6%. At the same time there was an increase in the import of the textile goods and footwear import by 36.5% and of foodstuffs and raw materials for their production of 4.1% registered.
As a result of the fact that export value volume continued to decrease at higher rates than that of import, the foreign trade balance has dropped to the level of USD 4.6 billion, which has been the minimum since June 2003.
At the beginning of February 2009 the unexampled protectionist measures of the member-countries of the World Trade Organization were discussed in Geneva. The introduction of the limitation for the global trade aimed at counteracting the recession can in fact complicate the progress of the world economy on the way out of the crisis.
According to the WTO forecasts, in 2009 the volume of the international trade will decrease by more than 2.1%, whereas in 2008 there was a growth of 6.2% observed. The number of the antidumping investigations increased by 40% as compared with the corresponding figures of the previous year.
The inadmissibility of the introduction of limitations and barriers was discussed at the summit of G20 as long ago as in November 2008. However the promises turned out to be only declarative in the long run. Since the declaration many countries have introduced additional measures to protect the national economy.
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