Russia’s federal statistics agency Rosstat said on Thursday that industrial output grew 4.9% in April compared to the same month last year, news website Znak reported.
The figure is an increase after 1.2% growth year-on-year in March, latest official data shows.
The notable increase in industrial output comes as a surprise, as there was a consensus in expectations of economists surveyed by Reuters for a 1.5% growth. First-quarter GDP growth in Russia came in weaker than expected slowing notably to 0.5% year-on-year in 1Q19, down from the strong 2.7% y/y seen in 4Q18 and 1.9% y/y in 1Q18.
The latest data on the growth of Russian industry is likely to be received with scepticism, scrutinizing Rosstat’s bumpy indicators and seasonal factors at play, bne Intellinews writes. Without accounting for seasonal and calendar effects, industrial output expanded by 1.4% in April after 0.6% decline in March.
In the reporting month the biggest driver behind the stronger output was the Oil & Gas sector: the production of crude oil and natural gas rose by 7.4% y/y and 16% y/y, respectively. “Overall, the resource industry was up by a solid 6% y/y in April,” BCS GM commented on May 23.
Apart from O&G, other segments of industry that displayed robust dynamics included food processing (meats, cheese, vegetable oils), chemical production, construction materials, electronics and cars (the latter was up 5% y/y).
“Industrial production has exhibited some volatility in recent months, which raises some questions about the quality of the data and could result in future revisions,” Sberbank CIB commented on May 23.
Uralsib Capital believes that “sharp improvement of April’s industrial output numbers is due to mostly one-off factors, such as significant improvement of external market conditions, higher investment activity from large state companies, and increase in working days year-on-year.”
BCS Global Markets also sees April’s growth as unsustainable, with a deceleration expected in May that will have two fewer working days year-on-year. This could extend the volatility to 2Q19 overall.
Still, BCS estimates that Russian industry could grow 2.7% y/y in 2019, which is higher than current official (2.3%) and consensus (1.8%) forecasts. However, same as before, the growth is seen helped by stronger public demand – an increase in defense procurements and the start of the implementation of the government’s “national projects.”