Almost three-quarters of the businesses in St. Petersburg have experienced a decline.
Rewritten Article:
Peter's Patchwork Production:
The Industrial Production Index (IPI) in St. Petersburg surged by a whopping 6.7% in January-March 2025 compared to the same period the previous year, according to Rosstat. However, the celebratory mood is dampened by a striking increase in sectors slacking off or experiencing production volume reductions.
The IPIs in St. Petersburg outpace the national average by 5.6 percentage points, but the processing industries, which contribute a whopping 83.2% to the city's industrial production, have faltered, with an IPPI of 109.4%, while the national average hovers at 104.7%. Notably, these figures represent a significant slowdown compared to the first quarters of 2024, when the overall IPI stood at 111.3% and processing industries boasted a 112.4% IPPI.
As RBC St. Petersburg reports, the city saw a downturn in the volumes of industrial production in many sectors throughout 2024. By the end of the year, half of the sectors (13 out of 26, tracked by Petrostats) had slowed down or witnessed a decline, and this negative trend has only intensified in 2025 with the number of troubled sectors reaching an overwhelming 19.
Experts attribute the city's overall industrial growth to sectors primarily focusing on state defense orders, such as radioelectronics, which saw an IPPI surge of 21% in Q1 2025. Furthermore, growth in transport machine-building was driven by enterprises producing engine-building and shipbuilding components. However, civilian production, in most cases, is either slowing down or experiencing declines in production volumes.
According to the Center for Macroeconomic Analysis and Short-Term Forecasting (CMAS), the volume of civilian product production dipped by a disheartening 0.8% per month in Q1 2025 (including a 1.1% decrease in March, adjusted for seasonality). As a result, the production level plummeted to its lowest values since April 2023. "Compared to the same period last year, the index in March was 100.8% for industry as a whole and 98.4% for productions without sectors with a dominant military presence," the CMAS report states, hinting at a potential transition to recession.
In stark contrast to the national trend, food production in St. Petersburg is thriving, with the IPPI reaching a robust 106.6% in January-March, while pharmaceutical production has faltered. In Russia, this sector fell by a disappointing 4.6% per month during the first two months and boomed in March, though this transient growth contrasts with a 16.3% decline in St. Petersburg's production volumes in March compared to the same period in 2024.
In March, the production of finished metal products expanded in St. Petersburg, bucking the 5.5% decrease the rest of the country experienced. However, the production of metal construction materials and metallurgical products, like in Russia, decreased steadily during the quarter. Notably, St. Petersburg’s energy machinery sector shows stable growth, with the IPPI for the first quarter at 110.8%, and the volume of shipped products surpassing last year’s figure by more than 18%.
Despite the differing dynamics in St. Petersburg and the national trends, the city's civilian manufacturing sectors, critical areas such as advanced manufacturing and IT infrastructure, and energy and heavy industry, may well feel the strain of resource redistribution, inflationary pressure, economic stagnation, sanctions, geopolitical isolation, and the exodus of Western firms.
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RBC Insights:
The St. Petersburg industrial sector's performance, while displaying overall growth, is far from rosy. Factors contributing to Russia's industrial slowdown, including military-industrial dominance, inflationary pressure, economic stagnation, sanctions, and geopolitical isolation, likely have a localized impact on the city. Civilian manufacturing sectors, tech and data infrastructure, and energy and heavy industries may experience reduced investment, labor shifts, modernization challenges, and supply chain disruptions.
- The average growth rate of industrial production in St. Petersburg's civilian sectors, such as advanced manufacturing and IT infrastructure, might face a strain due to factors like resource redistribution, inflationary pressure, economic stagnation, sanctions, geopolitical isolation, and the exodus of Western firms.
- The microelectronics industry in St. Petersburg, a critical area, may encounter modernization challenges and supply chain disruptions due to the same factors contributing to Russia's industrial slowdown.
- Despite the robust growth in food production in St. Petersburg, the city's pharmaceutical industry falters, symbolizing a contrasting trend compared to the national data.
- In contrast to the national trend, the production of finished metal products in St. Petersburg expanded in March, while the production of metal construction materials and metallurgical products decreased steadily during the quarter.
