Commercial Cooling Systems
In the first half of 2025, Russia's industrial production growth slowed to around 1.4%, according to Rosstat, signaling an economic "overcooling" or emerging stagnation. This trend, which reflects a segmented economy increasingly reliant on defense-related activities, has been marked by slow growth in the military-industrial complex and steep declines in civilian sectors.
The processing industries grew 4.2% year-on-year, almost entirely due to special sectors like defense and military manufacturing. However, sharp contractions occurred in civilian sectors. Automobiles production fell by 47%, wood products dropped 18%, non-metallic mineral products decreased 11%, civilian transport declined 26.8%, electronics dropped 8.6%, and leather goods declined 4.7%.
Some civilian industries like clothing (+12%) and pharmaceuticals (+9%) saw moderate growth, but they were exceptions rather than the rule. Notably, the funeral services industry expanded by 16% in H1 2025 due to demographic trends and war casualties, reaching nearly $425 million in revenue from January to April.
Analysts state the economy's growth is heavily skewed toward defense production, with machinery-building up 7%, while all other industrial sectors collectively contracted by 0.4% in recent months. This raises concerns about long-term sustainability and structural imbalances in the economy.
The decline in production release plans optimism in July 2025 is a logical response to the cooling demand. In July 2025, the balance of enterprise production intentions turned negative for the first time since August 2022. Output in civilian industries has shifted to a decline, with electricity generation decreasing by 1.9% year-on-year in January-June 2025.
However, there are signs of growth in other sectors. Industrial growth for the first half of 2025 slowed to 1.4% year-on-year, but output of other transport, electronics and optics, and ready-made metal products increased significantly. July sales forecasts remained unchanged following a sharp decline in June 2025 to a 35-month low.
If the central bank goes for a significant easing of monetary conditions, a recovery can be seen in these segments by the end of the year, according to Vladimir Salnikov. Analysts at the Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF) noted a decline in prices for three months as of May.
In summary, Russia’s industrial production in 2025 is characterized by fragile growth concentrated in defense industries and steep declines in civilian manufacturing, constraining overall economic development and signaling deeper underlying economic challenges.
The decline in civilian manufacturing sectors, such as automobiles, wood products, non-metallic mineral products, and civilian transport, has been precipitous, with electronics and leather goods also experiencing significant drops. On the other hand, the finance sector seems to be maintaining some stability, as analysts at the Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF) have noted a decline in prices for three months as of May. Moreover, signs of growth are emerging in other business sectors, including other transport, electronics and optics, and ready-made metal products.
