Newsweek: Russia's economy is falling apart, according to Russian data

30 June 2022, 20:49 | Economy
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If Russia's default on foreign debt, the first since the Bolshevik coup, is not a strong enough indication of the impact of Western sanctions on the Russian economy, new data on the country's socio-economic situation leaves no doubt that the Russian economy is gradually falling apart..

New data from the Federal State Statistics Service of Russia shows that production has collapsed in numerous sectors: from the automotive industry to household appliances. In addition, retail sentiment also sank heavily, writes Newsweek.. The Russian industrial production index is calculated monthly. This is an indicator of real results in the areas of mass production, mining, as well as in the gas industry and power generation. In May, this index decreased by 1.7% compared to the same month in 2021. In April, the fall was 1.6% in annual terms. The mining sector "

At first glance, these numbers seem rather small.. But they speak of a general downward trend that becomes even more evident when one considers Russian production of specific products.. The automotive industry was hit the hardest, down 96.7% compared to 2021.. Production of trucks fell by 39.3%, diesel and gasoline engines - by 57%. Production of diesel locomotives fell by 63.2% and freight cars by 51.8%.

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French automaker Renault, which controlled Russia's biggest plant, AvtoVAZ, halted all operations at the Moscow plant back in March in response to the Russian military incursion into Ukraine.. In the end, Renault agreed to sell Russian assets for a notional amount.. Air cargo volumes fell by 86% year-on-year. Other areas also suffered..

The production of refrigerators fell by 58.1% compared to the level of 2021, the production of washing machines - by 59.2%, electric motors x by 49.9%. Also in Russia, they began to produce 49.7% less TVs. Production of elevators decreased by 34.7%, and excavators - by 60%. Interestingly, cigarette production also fell by 24.5%..

Russian data show that retail turnover and consumer confidence have fallen compared not only to 2021, but also to the beginning of the year. Overall sales are down sharply due to a drop in customer demand. This may indicate that the real wages of Russians have decreased against the backdrop of higher inflation.. The same thing happened with real pensions, which decreased by 8.2% in May compared to May last year.. Russian real wages fell by 7.2% in April. All these indicators prove that the Russian economy is suffering despite all the news about the strengthening of the ruble after it collapsed hard at the end of February.. Newsweek notes that the collapse of industrial production in Russia is less than Western economists expected. But, despite this, the contraction of the real Russian economy is undeniably.

The only unexpectedly good news for the Russian Federation is the situation on the country's labor market.

The data suggests that the unemployment rate in May was no more than 3.9%. However, given how inflation is eating into Russian wages, it is unlikely that such high employment will result in an increase in consumer demand and stop the impending recession in Russia..

Recall, on June 27 in the morning it became known that Russia defaulted on its sovereign debt in foreign currency for the first time since 1918.. A few hours before the end of the grace period that Russia is likely to default, Bloomberg warned.

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