Russia's recovery in industrial output this year may exceed gains in gross domestic product, as improvements in power generation and mining will be slow to lift consumer spending and employment, Alfa Bank said Friday. Production may jump 5 percent, topping Alfa's previous forecast of 4 percent growth, after output rose an annual 5.7 percent in March, said economists led by Natalya Orlova. Mining and quarrying, which climbed an annual 6.6 percent last month, will increase in 2010 by "much more" than the 1 percent Alfa predicted earlier. "Faster industrial production growth, however, doesn't necessarily imply higher GDP growth, since it isn't driven by labor-intensive sectors," the report said.
Growth in manufacturing, which provides the "transmission from industrial recovery to final consumption," has been volatile, even as it advanced an annual 5.1 percent in March following a 0.8 percent rise in the previous month, Alfa said. "Unless unemployment declines substantially below the current high level of 8.6 percent and falling inflation finally translates into a strong improvement in households' real disposable income, we believe GDP growth may substantially underperform the industrial recovery," it said.
Industrial output grew a seasonally adjusted 0.1 percent in March compared with the previous month, while manufacturing added a monthly 0.3 percent, Economic Development Minister Elvira Nabiullina said Friday. Industrial output fell a monthly 0.6 percent in February on a seasonally adjusted basis, after growing 0.7 percent in January on the month, Economic Development Ministry data show. The government expects industrial production to expand 2.8 percent this year.
