Russian industry showed renewed signs of weakening in February, as more enterprises began planning production cuts rather than increases. This is indicated by monitoring data from the Institute for National Economic Forecasting of the Russian Academy of Sciences (INEF RAS), cited by Nezavisimaya Gazeta.
January data worsened, and expectations followed
The deterioration in production expectations came after weaker official figures in January. According to Rosstat, industrial output in January fell by 0.8% year-on-year, following 3.7% growth in December 2025. The decline was particularly pronounced in manufacturing: down 3% year-on-year, compared with nearly 8% growth a month earlier.
The Ministry of Economic Development attributed the reversal to a calendar effect: January 2026 had two fewer working days than the same month a year earlier. Analysts at the Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF), however, argue that December’s surge did not reflect a durable improvement in underlying conditions. In their assessment, recent gains were driven mainly by sectors with a high share of defense-related output, while civilian production has stagnated since the second quarter of 2025, after a decline in the first quarter.
Profitability squeeze raises investment and inflation risks
Another source of pressure has been falling profitability. CMASF estimates that in the first three quarters of 2025, profitability moved close to pandemic-era lows. The gap between profitability and borrowing costs reached record levels in the second quarter and narrowed only marginally in the third.
Across most manufacturing industries, profitability is either significantly below the yield on Russian federal loan bonds (OFZ) or roughly comparable to it. The most difficult situation is reported in wood processing, transport machinery, and building materials. Borderline profitability is seen in machinery (excluding transport equipment) and metallurgy. Consumer-oriented sectors—particularly food production—and the chemical industry remain exceptions, where returns still exceed the risk-free alternative.
Analysts warn that weaker profitability is constraining investment and limiting the expansion of supply. Over the medium term, this may create additional pro-inflationary risks.
