MOSCOW (AP) -- Russia's industrial production plunged beyond expectations in November, fresh evidence that the economy may be entering a recession that will be deeper than previously feared.
Output fell a stunning 10.8 percent from October to November, an official from the Federal Statistics Service's press office said Tuesday. Production contracted 8.7 percent in November from the same month last year, marking the biggest falls since the 1998 financial crash.
Manufacturers have been strangled by choked credit markets and plunging demand for commodities, particularly metals.
"This is extremely important," said Anton Stroutchenevski, an economist at Troika Dialog in Moscow. "These figures indicate the competitiveness of the Russian economy. It is the start of the economic chain reaction," he said, suggesting the pain will spread from manufacturers to other sectors in the economy.
Metal producers, particularly steel plants, have slashed production and laid off large numbers of workers. Construction projects in Moscow have stalled. Some truck and car producers plan temporary shutdowns at their Russian factories.
The oil sector, the backbone of Russia's economy, is stuttering to a halt as crude prices hover below $50 a barrel.
Russia has enjoyed impressive economic growth over the past eight years, averaging more than seven percent annually. But in a clear indication of how bad things have become, many economists are penciling in growth of around 1 or 2 percent in 2009, while some say there could even be a contraction.
A senior economics official caused a stir last week when he said that Russia had entered a recession. The Kremlin was quick to issue a rebuttal as it seeks to maintain a semblance of stability, with Finance Minister Alexei Kudrin saying Monday that the economy could expand by 3 percent next year.
But the central bank has since August spent a quarter of its vast international reserves -- the third largest in the world -- to support the currency and the economy through the crisis, casting doubt over the Kremlin's ability to forge ahead with major investment projects that are critical to maintaining growth.
Tens of billions of dollars have been spent defending the ruble, which has come under intense pressure because of collapsing oil prices and huge capital outflows.
The Central Bank has allowed the ruble to depreciate six times in five weeks -- each time in small moves -- as the government seeks to avoid the panic of the 1998 financial crisis.
The ruble has lost about 15 percent of its value against the dollar since August, but many economists say it has much further to fall.
Economists have urged the Central Bank to allow a steep one-off devaluation to restore confidence and kickstart the economy.
"If the (steep) devaluation happens, then (people) will see the Central Bank has stopped using the reserves," said Stroutchenevski at Troika Dialog. "We'll see more interest in ruble assets ... and the banking system will start working normally again."