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Industrial production accelerated to 3.4% YoY in July


According to Rosstat, industrial production growth accelerated to 3.4% YoY in July, from 1.9% YoY in June, above the consensus from both Bloomberg (2.5% YoY) and Interfax (2.2% YoY). Seasonally adjusted, industrial output was up 0.9% MoM.

The detailed breakdown reveals that July’s rebound in growth was mainly driven by manufacturing, which was up 5.7% YoY (from 3.4% YoY in June) on the back of higher growth in the meat and milk-related industries, some recovery in metals production (steel, rolled metals), chemicals industries, and a slight increase in construction-related output.

The growth in mining was a slightly positive 0.9% YoY (up from the 0.2% YoY in the previous month), while gas production kept contracting, down around 8% YoY. The growth in utilities (electricity, water and gas distribution) moderated to 0.8% YoY (from 2.1% YoY in June). 

The acceleration in industrial production growth last month coincided with the stronger PMI Manufacturing and railway cargo turnover numbers for July. The slowing global economy continues to dent export demand (especially for gas), while chemicals industries as well as construction- and metal-related output were somehow stronger last month than in June.

The higher IP number in July can partly be explained by the calendar effect (there are more working days than in the previous month and in 2012 on average). All in all, we see healthier IP growth supporting our forecast of a 25bp hike in the key rates at the CBR’s next policy meeting (scheduled for the first half of September), although we do not expect it to last long. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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