The Dynamics of Output Production inEngineering Industries (in percent to the previous year)
Chemical and oilengineering
Machine-tool andtool-making industry
Tractor andagricultural engineering
Engineering for light and foodindustries and household appliances
Source: Goskomstat of the RF(State Statistics Committee)
However, n spite of all the positivetendencies in the development of engineering industry mentioned above, itsshare in industrial output production growth rates is much lower than that ofraw materials sector. It can be explained both by retrospective developmenttrends and state-of-the market characteristics over the last years.
The rise in consumer demand is reflected inthe optimization of the output produced in light and foodindustries. Goods saturation of the consumer market proves to besteady and entirely corresponds to the paying capacity of the population. Theincrease in output produced in light industry in 2001 accounted for 5,0 %, andin food industry there was a rise of 8,4 %. But even under such conditions theimport share in the total value of merchandize inventory of retail tradeturnover has a tendency to rise. One should pay attention to the fact that,while domestic manufacturers are holding strong position in foodstuffsturnover, the situation in nonfoods market is determined by the intensiveimport expansion. A short-term excess of the light industry output growth ratesover the dynamics of textile goods import and nonfoods turnover occurred tillIII Quarter 1999. Subject to changes in competitive environment and increase inimport efficiency, the tendency to ousting domestic goods from the market isenhancing.
Dynamics of import of textile garments andthe output by the domestic light industry, as % to the resopective quarter ofthe prior year; theturnover of the retail trade with non-food goods = 1
Dynamics of import of foof stuffs and outputby the national food sector, as % to the respective quarter of the prioryear; the turnover of trade with food stuffs=1
The growth rates of the output produced infuel and energy industries and export-oriented raw materials industriesaccounted for 104,9 % and 103,6 % respectively. The slowing-down of the growthin raw materials industries reflects the tendency to the decline in physicalexport. In 2001, the export share in total sales of product accounted for 23,3% against 32,2 % in the previous period. The tendency is growing alongside withcompetitive import expansion, which might have a negative impact upon thedevelopment of economy guidelines. In 2001, import increased by 18,9 %, whenindustrial goods output rose by 4,9 %.
Since the second half 2000, the factorsfacilitating the slowing-down of growth rates in processing industry havestrengthened their influence. The exceeding growth in prices of the primaryenergy resources, real ruble exchange rate growth, and intensive increase inwages determined the competitive environment changes in home market. As aresult, since IV Quarter 2000 the slowing-down of income rate growth and finaldemand industries investments, as well as the decline in physical export havebeen fixed. Alongside with the given market performance, there have appearedmore drastic limitations. The possibility of further output growth has beenseverely restrained by the performance characteristics of stockholders equitiesand lack of equipment.
The analysis of manufacturing facilitiesshows that most part of the equipment can’t be employed in manufactureconsidering its physical and moral depreciation. Manufacturing facilitiesutilization differentiates greatly. In raw materials industries characterizedby quite a small share of the value-added, capacity utilization proves to bemuch more intensive than in processing industries. Even within differentmanufactures of one and the same industry manufacturing facilities are utilizedto a different extent. Though active employment of spare manufacturingfacilities determined the recovery of economic activity, there are certainlimits to capacity utilization.
In general, the demand in raw materialsindustries can be satisfied by employing available facilities since the qualityof raw materials is not a subject to drilling mechanisms. New technologiestherein facilitate costs reduction, labor productivity growth, increase in thecomplementary products output, etc. However, in mining industries thecombination of severe depreciation and intensive utilization indicates that theequipment withstands excessive duty.
In processing industries, especially inhigh-tech manufactures, manufacturing growth potential is determined by theequipment performance and implemented technologies. Severe stockholdersequities depreciation in processing industries proves to be a reason for alower rate of manufacturing facilities utilization as well as an impediment tofurther output growth.
The correlation between depreciation ratesand capital stock age structure displays an insistent need for activation ofrenewal process. The engineering industry is rated among the worst in respectof production capacity utilization. A long-term investment pause lead to theconservation of engineering industry structure, and within the framework oftransition to the investment-based economic growth model, the dearth ofequipment and machinery appeared to be a factor limiting output growth ineconomy. The situation is aggravated by the fact that engineering industry,being inconsistent with market performance criteria, fails to achieve such asales level as is necessary to make solid investments in re-equipment of ownmanufacturing facilities.
The change in the dynamics and structure ofdomestic demand was accompanied by the competition enhanced among domesticmanufacturers, as well as among domestic and foreign substitution goods. Thesituation is getting more complicated under the conditions favorable for growthin consumer and investment goods on the basis of per capita income growth, onthe one hand, and decline in competitive advantages of domestic goods pricelevel, on the other. The existing situation entails the slowing-down of growthrates in processing industry, the latter being subject to the investmentdynamics and innovation development strategy. Depreciated inventory, oldproduction technologies, and low rates of labor productivity sufficientlyrestrain the rise in aggregate supply as well as any change in its structure.Under such conditions, foreign manufacturers enlarge their share in the Russianmarket regarding high market capacity and gradual paying capacity recovery. Inthe event that domestic manufacturers reduce their investment activity, theymight lose their hard-won positions and competitive environment may change.
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