IP growth declined further below zero in February
According to Rosstat, IP plunged deeper into the negative zone in February, with a decline of 2.1% YoY. The final reading was significantly below the consensus forecasts (-1.0% YoY BBG and -0.8% YoY Interfax), but in line with our more conservative estimate of -2.0% YoY. SA industrial production printed a decline of just 0.1% MoM. The key drags were the utilities sector, with a 10% YoY decline (the largest since September 2009), and the mining and quarrying sector, with a 2.2% YoY decline on the 4.7% YoY drop in gas output and a contraction in oil production (-2.2% YoY). Meanwhile, the growth in manufacturing remained in the red (-0.1% YoY), reflecting weaker performances from the auto industry (-15.7% YoY in trucks output) and metals (pipes -1.6% YoY). Meanwhile, growth advanced in construction-related goods.
The weak IP reading did not come as a surprise as 2012 was a leap year (despite, the same number of working days) and given the warmer weather this February vs. a year ago (see Early Indicators of 6 March). Besides, the slight rebound in MoM SA growth implies that the trend remained on the moderately weak side, i.e., it was cast in the same mould as the performance of recent months. Hence, the latest reading is set to be the bottom for FY13, as in March the colder weather will likely trigger a higher annual growth pace in the utilities and mining sectors. During the first half of March, we calculated (based on SO-UPS
data) that electricity output added 0.6% YoY (vs. -7.5% YoY in February). Later this year, monetary stimuli and infrastructure spending are likely to gradually revive the production growth.
As for CBR policy, the full-February statistics report is due out later this week, which we expect will also be weak. In our view, poor economic data and the first decline in the headline CPI YoY growth rate in March will open the way for the start of the easing cycle by the CBR as early as in April.
Maxim Oreshkin, Daria Isakova
VTB Capital analyst
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