Russia’s industrial output declined by 0.8% in December. This followed growth of 3.7% in the previous period.
The latest figure shows output moved from expansion to contraction. No further breakdown or sector detail was provided.
That sharp drop in industrial output from December 2025 was a significant warning sign we’ve been monitoring. The shift from 3.7% growth to a -0.8% contraction confirms the economy is cooling much faster than anticipated. This suggests that the initial data for the first quarter of 2026 will be critical for confirming a recessionary trend.
We should look to position for further weakness in the Russian Ruble. The currency has already slipped 2% against the dollar since the start of February, and this economic data justifies bets on more depreciation. Buying USD/RUB call options is a straightforward way to play this expected downturn.
For equity markets, this signals pressure on the MOEX index. We can expect corporate earnings for manufacturing and heavy industry sectors to face downgrades in the coming weeks. We believe purchasing put options on broad Russian market ETFs offers a good hedge against a potential market slide.
The Central Bank of Russia is now more likely to adopt a dovish stance at its next meeting in March. January’s inflation figures came in slightly below forecast at 5.1%, giving the bank room to consider a rate cut to stimulate the economy. This makes short-term government bonds look more attractive.
This economic uncertainty should also increase market volatility. We saw similar spikes in volatility during the downturns of 2020 and 2022 when faced with economic shocks. Buying straddles on major Russian stocks could be profitable as we anticipate larger price swings in either direction.
Finally, we must watch how this impacts commodity markets, particularly oil and natural gas. While a slowing Russian economy might suggest lower global supply, recent data from January 2026 shows China’s own manufacturing PMI also dipped, hinting at a broader slowdown in demand. This creates a complex picture where falling demand may outweigh any potential supply concerns.
