Production capacity in Russia in the second quarter showed historical loading at 81%, which is a record value and indicates an overheating of the economy, especially against the backdrop of an increase in military orders. This could trigger an acceleration in inflation.
Such high capacity utilization does not indicate economic well-being, but rather indicates overheat economy, according to the economic channel MMI. Excess demand at this level can cause a slowdown in production growth due to the inability to meet it, as well as an increase in costs, which will eventually lead to inflation.
The central bank has warned of this scenario multiple times, most recently when it justified a rate hike to 8.5% a week ago. According to the regulator, the steady growth of domestic demand exceeds the possibility of expanding production in many industries, including due to limited free labor resources.
The situation is more complicated than it seems at first glance, RBC notes. First, the increase in load stimulates investment, especially in the manufacturing sector. Secondly, the utilization of production capacities differs by industry. In processing and construction, the load is maximum, and in the production of polymers, cars and durable goods, it is minimal. Therefore, growth in lagging industries should not cause an inflationary effect.
All these factors of overheating could be the reason for further rate hikes by the Central Bank in September, regardless of structural reasons. According to The Bell analysis, the latter are associated with a sharp increase in military orders against the backdrop of budget injections. The main conclusion: a stable growth in production was observed in industries related to military issues and the development of the occupied territories.