Russia's industrial output up by 2.9% in August

Russia's industrial output up by 2.9% in August
Industrial output in Russia increased by 2.9% year-on-year in August 2019, inching up versus 2.8% y/y growth in July
By bne IntelliNews September 17, 2019

Russia’s industrial output crept to 2.9% year-on-year in August 2019, inching up from 2.8% y/y growth in July, and posting a total 2.6% y/y growth in 8M19 overall, Rosstat said on September 17.

Notably, in seasonally and calendar-adjusted month-on-month terms, industrial production rose 0.6% m/m, versus a 0.3% m/m decline in July. 

Industrial production in August beats consensus estimates, and "saw the same growth rate as in July driven by the base effect and better performance in food and chemical industries," BCS Global Markets commented on September 17 reiterating full-year industrial output growth at 2.1%.

The two main components – mining (3.1% y/y versus 3% in July) and manufacturing (2.7% y/y versus 2.8%) retained the same rate of expansion in August as in July. However, output in utilities (2.1% y/y v 1.7%) has shown acceleration due to much colder weather than a year ago.

"In August, sizable increases in output were recorded in the production of meats, cheese, sunflower oil, potatoes, as well as in oil refinery and other chemical products," BCS writes, while noting negative y/y dynamics in the production of cars (-3% y/y) and many electronic items.

Looking forward, BCS reminds that in 2018, Russian industrial production showed softer output in 2H18, thus expecting a favourable base effect for y/y dynamics during most of 2H19. "However, the prime driver for industry – rising domestic demand driven by the implementation of the government’s national projects – has yet to materialize," BCS continues to warn.

As reported by bne IntelliNews, lacklustre economic growth is expected to speed up in 2H19 due to increased government spending on National Projects. However, other analysts previously warned that turnaround in the second half of the year risks not to materialize.

In the meantime, commenting on August industrial output, Sberbank CIB notes construction materials "generally improved" with cement output up 3.4% y/y, and concrete up 2.3% y/y, glass up 11.1% y/y. 

"This could be viewed as a healthy leading indicator for construction activity, which could be picking up in light of rising government infrastructure spending," Sberbank argues. Still the bank notes that the disappointing metals production figure indicates that external demand remains weak.

Most recently, following the slow start of the year, the Ministry of Economic Development has downgraded the economic outlook, expecting GDP growth of 1.3% in 2019.

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