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Industrial production returned to its normal 2% YoY growth path in August


According to Rosstat, industrial production growth dropped to 2.1% YoY from 3.4% YoY in July. This is significantly below the consensus forecasts of 3.1% (Bloomberg) and 2.9% YoY (Interfax), but in line with our expectations of 2.3% YoY.

Seasonally adjusted industrial production decreased 0.7% MoM. The detailed breakdown reveals that the growth in August was mainly driven, as usual, by manufacturing, which added 4.7% YoY (vs. 5.7% YoY in July) on the back of growth accelerating in trucks production, the strong performance of the poultry, milk and sunflower oil industries, and growth in the metals and construction materials sectors (which was still robust despite some deceleration). The growth in mining ticked down to 0.8% YoY (from 0.9% YoY), despite a softer decline in gas production (-2.8% YoY vs. -7.9%) and a spike in the coal industry (12.9% YoY vs. 5.6% YoY on average in 7mo12) during the reported period. The growth in utilities (electricity, water and gas distribution) kept moderating and decreased to 0.2% YoY (from 0.8% % YoY in July).

The data suggests that economic growth was back to its 2% trend, after a technical increase in July (mainly due to the calendar effect). The August numbers came in line with the PMI Manufacturing readings. The modest industrial production performance supports our cautious view on 2H12 and our FY12 real GDP forecast of a 3.5% YoY increase. It also underpins our view about the urgency of supply-side reforms in Russia. The deceleration in the global economy kept negatively affecting export demand. However, improvements in gas production look beneficial, but we have to wait and see how sustainable this trend is. At the same time, the growth in investment-driven industries (construction- and metalrelated) was almost unchanged MoM, but weaker than at the beginning of this year, which implies that there is unlikely to be a positive surprise from the growth in fixed capital investment in August.
Maxim Oreshkin, Daria Isakova
VTB Capital analyst

Rosstat, Russia, GDP

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