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IP growth bounced back to 0.1% YoY in June


According to Rosstat, industrial production in June added a mere 0.1% YoY, although that was still better than the decline of 1.4% YoY in May. The reading came below our forecast and the Bloomberg consensus (both expected +0.5% YoY). On an SA basis, it advanced 0.2% MoM in June, we estimate.

The key supportive factor was the lower drop in manufacturing output: -1.2% YoY in June vs. -4.4% YoY in May. We note the better performance in construction-related goods as well as chemicals, cars (a softer contraction of -4.4% YoY vs. -18% YoY in the previous month) and metals (including pipes).

The mining sector remained the key driver, adding 3.1% YoY (the second strongest over the last 16 months). Meanwhile, the faster growth in the mining and quarrying industries (+0.8pp on May) was rather surprising given that coal and gas production declined in June, although the advance in oil output growth looks supportive. Furthermore, in May we saw a similar picture when the unusual strength in mining growth was due to other items (such as marble and natural diamonds). Hence, these factors underpin the mining output increase last month as well.

Besides, the annual change in electricity output slid slightly below zero, to -0.5% (vs.+0.4% YoY in a month ago) despite the hot weather.

The June IP report showed a recovery from May’s depths (on the less negative calendar factor), although overall industrial output was worse in 2Q13 than in the preceding quarter, indicating flattening local demand (even improved, but the ongoing contraction in car output explicitly illustrates this) and the bleak external environment.

The CBR’s recent bolder easing step could positively impact IP growth, but only closer to 4Q13. Hence, we see the annual increase in industrial output at around 1.7% YoY in 2H13, supported slightly by the more favourable base effect (better than the 0.1% YoY in 1H13 but lower than the 2.6% YoY printed in 2012).

Maxim Oreshkin Daria Isakova
VTB Capital analyst

Rosstat, gas, oil, CBR

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