According to Rosstat, IP growth printed a blip up to 2.1% YoY in February, from the 0.2% YoY drop at the beginning of this year. This came as a positive surprise and well above most predictions, including our estimate of 0.5% YoY.
Sector-wise, annual growth in mining output stood almost the same, at 0.8% vs. 0.9% a month ago, while manufacturing also advanced sharply with an increase of 3.4%, the highest over the last three months. The change in electricity output was expectedly good, at a 0.3% YoY decline vs. 5.1% YoY on average in November-January.
Output growth across the Russian industrial sector surprised on the upside in February, accelerating to more than 2% YoY, the highest pace since November 2013. This is in line with the almost stalled weather-adjusted electricity consumption, which dropped heavily a month before, but contradicts the shrinking rail cargo volumes.
At first glance, manufacturing output’s significant gain was the main trigger of the pick-up in headline IP. However, it does not seem to be broad-based and could turn out to be a blip. There was accelerated growth in stand-alone machinery sub-sectors, a slower drop in the automobile industry (cars and trucks output: -2.8% and -8.9% vs. -14.1% and -58.8% YoY, respectively) as well as rather strong growth in pipes output (+3.4% YoY).
Utilities were also supportive for the headline IP reading due to the colder weather. Mining stayed near January’s level, despite shrinking oil output (-1.3% YoY; this contradicts CDU-TEK as well MinEnergo data of slower, but still positive, growth in oil production last month).
The trend growth (3mMA SAAR) across manufacturing and mining industries continues to worsen this year.
In the light of still tight (or even tightening) policy mix, as well as persistent uncertainty (that kept denting consumer and business confidence), we do not believe February’s upturn in industrial production has enough ground to continue near term.