News: According to Rosstat, industrial production growth accelerated further in February to 6.5% YoY, from 3.8% YoY the month before, above the Interfax consensus of 4.5% YoY and our expectations of 5.0% YoY. This is the highest growth rate since January last year. Seasonally adjusted, industrial production increased 1.6% MoM.
The detailed breakdown reveals that manufacturing grew 6.3% YoY in February, up from 4.8% YoY in January. Mining added 3.7% YoY last month, compared with the 1.4% YoY increase the month before. The growth in the utilities sector also significantly improved, to 6.7% YoY in February, the highest reading since February 2010.
Our View: The latest data reveals a rebound in industrial production growth which is likely to make the CBR less concerned about the supply side of the economy and in our view it removes the last reason for monetary policy easing. The government might also see less urgency to start structural reforms if production growth is sustained. At the same time, the growth in railway cargo turnover (a leading indicator for IP) almost halved in February to 6.1% YoY, from 11.5% YoY in January. Manufacturing PMI also remains weak, very close to the no-change 50-mark. Hence, the recovery in industrial output might prove to be temporary.