According to Rosstat, in 2012 industrial production rose 2.6% YoY vs. 4.7% YoY a year ago. December saw a rise of just 1.4% YoY (the second lowest growth since October 2009), while the seasonally adjusted MoM growth was 0.5%. The main driver remained manufacturing, even though it greatly decelerated to 1.5% YoY, a three-year low, from 4.0% YoY in November. This weakness came from poor performances almost across the board: metals (excluding pipes), machinery, construction materials, oil processing, food goods, and some chemicals all printed worse results. At the same time, utilities rebounded and added 4.7% YoY last month (vs. a decline of 2.6% in November). Meanwhile, mining stayed sticky at a close-tozero level of 0.2% YoY, despite gas production turning positive last month and adding 2.7% YoY.
Throughout 2012, industry grew at an increasingly slower pace: although IP growth was rather strong in 1Q12, at 4.0% YoY, it finished 2012 at below 1.5% YoY. Weaker growth in most manufacturing sectors (their combined contribution to IP growth slid to a three-year low of around 0.8pp) last month can be partly explained by the unfavourable calendar factor (December 2012 contained 21 working days while December 2011 had 22). For example, the less than 1% annual growth in car output (along with calendar factor) flagged a comprehensive slowdown on the market and coincides with the poor AEB data on car sales in recent months.
However, the cold weather was supportive for IP growth in December: in particular, the total contribution of electricity and heating to IP annual growth jumped to 0.5pp. Also, gas output showed the highest YoY growth since February. Overall, the IP report revealed ongoing adverse conditions on the supply side and so coincides with the recent concerns about the growth outlook expressed by the CBR. The weak reading supports our view that the CBR will start easing monetary policy in April-March.
Maxim Oreshkin, Daria Isakova
VTB Capital analyst
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