May IP review: stagnation continues

RUSSIA ENERGY / FINANCE - In Brief 20 Jun 2016 by Marcel Salikhov
May 2016 industrial production (IP) results haven't brought any surprises. Headline annual figure for May (+0.7% y-o-y) was slightly better than for April (+0.5% y-o-y) but on seasonally adjusted basis stagnation continues. We estimate that in May IP index was down 0.24% (m-o-m, sa) vs -0.38 (m-o-m, sa) in April 2016. Industrial sector hit the bottom in June 2015 and since then struggles to show steady rebound. Oil & gas production and other export-oriented industries like metals and chemicals supported overall production in the first months of 2016 but lost some steam in recent months. Crude oil (with gas condensate) production was 45.8 mln t (+1.6% y-o-y as compared to 5-7% y-o-y gains in Feb-March). At the same weakness in manufacturing holds with durable goods industries suffering the most pain. For example, auto production is down is 20.4% y-o-y in Jan-May 2016. Non-durable sectors are more resilient. Food production supported by import substitution and uptick in household demand holds 5-6% annual growth rate. So while industrial sector seems to find support at current levels, there are no yet signs of 'wide' industrial growth in most recent data.

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