Industry: Slumps 12.1% in July

UKRAINE - In Brief 19 Aug 2014 by Dmytro Boyarchuk

In July industrial output fell 12.1% y/y twice as fast than a month ago (-5.0% y/y in June). Stronger contraction of metals’ output (-12.3% y/y vs. 5.6% y/y at the prior month), mining (-12.1% y/y vs. -4.8% y/y in June) and utilities (-7.8% y/y vs. -1.5% y/y) were the main reasons for sliding rates speed up through the month. Machinery (-23.8% y/y vs. -20.8% y/y) and chemical production (-22.2% y/y vs. -21.7% y/y) were almost flat m/m thus also heavily contributing to two-digit industry decrease in July.

Apparently, intensified military actions at the east are the main reasons behind aggravated industry performance. In particular, Statistics Office reported 56.0% y/y industrial output slump in Luhansk oblast and 28.5% y/y decline in Donetsk oblast. To make matters worse in August fights at the region became even tougher with more devastation reported which means that contraction might be even deeper in August.

Against this backdrop, we are revising our industrial output forecast down to 6.9% y/y for 2014 from 4.9% y/y estimated previously. Important for this estimate we still assume the military operation will be finalized in early fall.

P.S.: Over the recent weeks situation at the eastern front has aggravated. More Russian regular troops coming into play are the main reason for that. Ukrainian army has totally blocked Donetsk and Luhansk what made Kremlin bringing more regular squads for unlocking supplies routs. Still, disregard heavy and bloody fights Russian troops did not reach much progress though managed to slowdown U...

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