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Industrial production – printed better than consensus


Yesterday, Rosstat published its report on industrial production growth in August. The headline number edged higher to -4.3% YoY, from -4.7% YoY in July, which was somewhat better than the Bloomberg consensus of -4.5% YoY. The mining and quarrying sector expanded 0.8% YoY in August, after the 0.2% YoY growth the month before. Two other components – electricity and manufacturing – are still in the negative zone, sliding 0.7% YoY and 6.8% YoY, respectively, but were marginally better than the YoY drops of 0.8% and 7.1% in July.

According to Rosstat’s estimates of sequential IP growth adjusted for seasonal and calendar effects, industrial production declined 0.3% after being flat in July. On a monthly basis, manufacturing pulled the headline figure down as it contracted 0.9% MoM; only the weaker performance in the comparable period last year allowed for a decoupling recovery in YoY growth to -6.8%, from -7.1%. Mining and quarrying edged 1.7% MoM lower against the more solid 3.3% MoM increase in July. Electricity and heating rose consistently, at 1.7% MoM for the second month in a row.

Looking at the items breakdown, we note a marked dichotomy: the production of consumption-oriented goods (including clothes, footwear, vehicles and food) underperformed while export-oriented industrial products demonstrated strength. Overall, we think that weak consumer demand constrained by sharply falling real wages will continue to weigh on the 'non-tradable' components of industrial production, whereas a recovery in the tradables sector is expected to continue pulling the headline figure a bit higher in the coming months.

Alexander Isakov, Petr Grishin
VTB Capital analysts


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