Growth in manufacturing sectors related to defence was behind a surprise spike in Russia’s industrial output in October, which was significantly above expectations and the biggest since December, analysts said on Thursday.
Industrial output rose 3.1 per cent in October year-on-year and three per cent month-on-month on a seasonally adjusted basis, significantly above analysts’ expectations of 0.3 per cent year-on-year. That followed a 0.3 per cent increase in September.
"In processing sectors, the largest segment, growth was still driven by the engineering industries, which are largely orientated towards defence," said Denis Popov from PSB bank, which is focussed on financing the military sectors.
The production of transport vehicles and equipment, including military combat vehicles, aircraft, ships and railway locomotives, accelerated in October to 41 per cent year-on-year from six per cent in September, according to the state statistics agency.
The production of finished metal products, including weapons and ammunition, increased by 19.4 per cent after a decrease of 1.6 per cent in September. The decline in passenger car production accelerated to 46.7 per cent from 1.7 per cent in September.
Renaissance Capital analyst Andrei Melashenko noted that growth in areas orientated towards government orders has returned to the average values observed since 2023. Defence procurement is done through government orders.
He estimated growth in sectors such as finished metal, electronic and optical products at 22.7 per cent year-on-year, from 4.4 per cent in September.
The analysts did not say what the reasons were for the spike in October. Military procurement data in Russia is confidential.
Manufacturing output accelerated to 4.5 per cent year-on-year in October from 0.4 per cent in September, while mineral extraction increased by 1.3 per cent after 0.2 per cent growth the previous month.
Russia’s economic growth is set to slow to about one per cent this year from 4.3 per cent in 2024, mainly due to the central bank’s policy of fighting inflation.
In the first 10 months of the year, industrial production grew by one per cent, compared to a 5.2 per cent growth in January-October 2024, with output falling across most civilian sectors.
The economy ministry cut the industrial output growth forecast for 2025 to 1.5 per cent from 2.6 per cent. It grew by 5.6 per cent last year.
(Reporting by Darya Korsuinskaya; writing by Gleb Bryanski, editing by Ed Osmond)