11/19/2014
By Jennifer Coombs

On Wednesday morning, Russia noted that industrial output picked up further in October by 2.9% over last year after expanding 2.8% in September. Month-over-month, industrial output rose by 5.1% in October after growing 2.7% in the preceding month. The headline jump was mostly due to an increased use of utilities, which grew by 29.0% for the month and 2.8% for the year. As the winter approaches, this is typically the time of year when Russia boosts production for electricity and heat. The manufacturing sector also showed substantial growth around 3.6% for the year and 3.3% for the month in October. This is the second month in a row where the manufacturing sector benefited from Moscow's decision to ban food imports from states that sanctioned Russia. Although the ban supports manufacturing, it boosts inflation which is now on track to reach a four-year high. Earlier in the week, Russia’s Finance Minister Anton Siluanov noted that annual inflation may reach a double digit reading in the beginning of 2015. In such an event, Russia’s central bank is likely to tighten its monetary policy again after hiking rates four times this year. Below is a chart of the change in Russia’s industrial production, which has notably spiked after the economic sanctions issued in the summer.

In China, home prices have been on a steep decline over the last year to the point where prices are lower than the same time a year ago. During the month of October, China's home prices slumped by an annual 2.6%, which effectively defied the government support measures that were meant to boost economic growth. This year-over-year price drop was the biggest since 2011. Falling prices should deter investors who are seeking capital gains, and most economists now expect the housing market correction to continue in coming months as developers struggle with high inventory levels. News of slowing foreign direct investment (FDI) was also a huge setback for housing prices, with overseas investment down 1.2% in the January-October period from a year earlier, with the fashionable service sector attracting $53.1 billion compared to the modest $32.5 billion that flowed into the now-struggling manufacturing businesses. Despite FDI growth moderating, China continues to be in denial saying that it expects its FDI to hit a record high of $120 billion this year, excluding no sharp changes in global capital flows. House prices in the capital city of Beijing dropped 1.3% year over year, which is actually the first decline since October 2012. Below is a chart of the year-over-year changes in China’s housing prices over the last year.

Jennifer Coombs
Wall Street Strategies

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