In November, output growth worsened in two of the three main industrial sectors (utilities and mining). The plunge in the former (-4.6% YoY, the highest since February) was the main trigger for IP weakening last month, with the warmer weather and an unfavourable working day difference to blame. Moreover, the latter printed a slowdown to 1.1% YoY growth, as the improvement in coal and oil production was unable to offset the broader weakness in gas output (stemming from a decline in local demand as gas exports rose to 17% YoY).
At the same time, despite November having one less working day this year than last, the pace of decline in manufacturing output, which accounts for the bulk of industrial production, slowed to -0.5% (from -1.1% WDA YoY in October) with several manufacturing sub-sectors showed stronger activity, including food, pipes, crude oil distillation, construction-related materials.
On balance, technical factors distorted the still weak (but not weakening) underlying picture. We note that our FY13 forecasts of 0.2% YoY now look a bit encouraging.
The falls in production of 0.1% MoM SA and 0.6% YoY (calendar-adjusted) in November would come as another disappointment to both Russian policymakers and us (earlier this year, the former had been expecting a turnaround in the economy before the end of 2013). However, GDP growth has been boosted in recent months by a pick-up in agriculture (on the poor harvest last year), in our view. In terms of policy, though, this would not shake the current mix of a rather tight fiscal stance and backward-looking monetary pattern.