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IP – growth ticked up to 0.3% YoY in September


According to Rosstat, IP annual growth edged up to 0.3% in September (from 0.1% a month ago), bringing the YTD growth to 0.1%. This came below Bloomberg expectations of a 0.5% increase and was fully in line with our forecast. SA IP growth slowed to 0.3% MoM, on the official estimate.

The jump in utilities’ YoY growth to 2.9% (from a 2.0% decline in August) was the main driver of IP acceleration last month. Moreover, the mining sector remained the key support for IP growth, but the pace of its growth cooled slightly to 1.7% YoY, despite still strong gas output growth of 7.2% YoY.

At the same time, continuously shrinking manufacturing output (-0.7% YoY) put a major drag on IP growth, with metal output contracting further and car production dropping again after a short-lived recovery in August (-7.2% vs. +3.7% YoY), despite some momentum in construction-related output.

September’s ‘improvement' in IP growth is to a large extent related to temporary support from cold weather as the utilities sector was the only one to report output growth picking up. The underlying picture, however, has actually worsened as manufacturing output continued to contract despite the additional working day this year. Another argument for the temporary nature of the IP tick-up is that WDA YoY growth dipped below zero with a 0.1% drop, mainly owing to a faster decline in manufacturing (-1.3% vs. -0.4%).

We believe that heavy demand from Europe for Russian gas will persist in the near term, underpinning IP growth amid bleak local demand and fragile emerging growth in metals. Hence, while acknowledging some downside risks, we retain our FY13 forecast of 0.6% YoY.

As far as policy implications are concerned, while the underlying trend in manufacturing continued to soften and there is little to suggest a turnaround in the months to come, the CBR is likely to take comfort in the fact there was no huge negative surprise. Besides, the regulator pays more attention to the rest of the monthly data.

Vladimir Kolychev, Daria Isakova
VTB Capital analyst

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