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IP - upturn in July to 1.5% YoY

IP surprised slightly on the upside in July, rising 1.5% YoY after 0.4% in June (consensus: 0.8%, VTBC: 0.5%). Pickup in manufacturing production to 2.4% YoY (from 0.3% YoY in June) more than offset a relatively sharp slowdown in mining (to 0.2% YoY from 0.8% YoY in June), while output growth across utilities came back to positive area (up 0.8% YoY ).

Reacceleration across manufacturing industries was the main positive surprise last month. A technically favourable statistical base played a hand, but it cannot explain the entire upturn. Industry-wide solid output gains across steel (up 6-8% YoY) and surging rail car production (up 20-30%) suggest continued Ukrainian import substitution. Also of note was that car production remained remarkably resilient, at 3.3% YoY growth against the backdrop of double digit decline in car sales, which is reflective of rising inventories and flags potential output cutbacks.

Across other (non-manufacturing) sectors, electricity production, which rose back above the waterline, was a marginal support (adding 0.2pp to the headline IP), but a 10% reduction in gas and oil output shaved near 0.2pp off the number

Daria Isakova, Vladimir Kolychev
VTB Capital analyst


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