Russia’s industrial production fell heavily by 3.7% year on year in February on account of the leap year affect, down from a 1.9% contraction the month before, Rosstat reported on March 16.

“This is significantly worse than in January (-1.9%). However, the headline number should not disappoint, as y/y comparisons are affected by the leap year: in February 2020, there was one extra day,” BCS Global Markets said in a note.

1Q20 was the last period before quarantine measures were introduced – that means that the y/y dynamic is bound to show a massive improvement in 2Q21, BCS GM reports.

Among major sectors of industry, the utilities sector was the clear driver in February – it posted a 7.4% y/y increase due to a much colder winter this year. Output in the manufacturing industry was down 2.4% y/y, while the mining sector showed the largest decline (-8.9% y/y).

Industrial output was significantly affected by cuts to crude oil production. According to Rosstat, oil output fell by a massive 13.5% y/y last month. Other growth laggards included metallurgy (-3.2% y/y) and the food-processing industry (-2.2% y/y). On the positive side, in February, natural gas output jumped 5.1% y/y, pharmaceuticals were up 28.1% y/y, production of textiles increased by 16.2% y/y and the automotive industry climbed by 10.8% y/y (car production rose 6.3% y/y).

“The moderate recovery continues,” BSC Global Markets chief economist Vladimir Tikhomirov said. “Overall, we see February’s industrial data as proof of a continuing moderate recovery in the Russian economy. Despite the leap year effect, a few key segments of manufacturing managed to post significant y/y output gains; strong performance was also recorded in gas, electricity and heating sectors. Going forward, the two major factors that will likely lead to an acceleration in industrial output are the improved epidemiological situation and a shift in the base factor for y/y comparisons. In 2M21, Russian industrial production fell 2.8% y/y – we forecast that industry could post growth of c6% y/y in FY21.”