Russian Industrial Growth Probably Accelerated to 2.5% in July

Russian industrial-production growth probably accelerated in July as homegrown demand for cars helped offset weaker metals exports.

Output at factories, mines and utilities expanded 2.5 percent from a year earlier, according to the median of 15 estimates in a Bloomberg survey. That would be faster than June’s 1.9 percent growth. The Federal Statistics Service in Moscow will release the data today or tomorrow.

The economy of the world’s largest energy exporter is weathering the debt crisis in the euro area, which accounts for about half of trade, with domestic demand powering growth of 4 percent from a year earlier in the second quarter. Indicators of sentiment among Russian producers and consumers remain “fairly positive,” the central bank said Aug. 10.

“Domestic demand remains exceptionally strong, mainly because budget policy served as a stimulus at the start of the year,” said Alexey Pogorelov, an economist at Credit Suisse in Moscow.

The Micex Index of 30 stocks has advanced 4.3 percent so far this year, lagging behind the MSCI Emerging Markets Index’s 6.8 percent advance. Urals crude, Russia’s main export earner, has surged 31 percent from a June low to $114.63 a barrel.

Car Sales

Sales of cars and light commercial vehicles grew 14 percent in July, matching the fastest pace since February, according to the Association of European Businesses in Russia. Foreign brands such as those made by General Motors Co. (GM), Volkswagen AG (VOW) and Toyota Motor Corp. (7203) posted the biggest advances, while OAO AvtoVAZ’s Lada had a 7 percent decline in sales from a year ago.

Still, OAO GMK Norilsk Nickel, Russia’s largest miner, reduced second-quarter output of nickel by 8 percent from the previous quarter, the company said July 30 in a statement. U.S. steelmaker Alcoa predicted last month that growth would be slower in Russia as European demand remains uncertain and prices are low.

Economic output in the euro region contracted 0.2 percent in the second quarter. That, together with slowing growth in China, will constrain Russian industry, said Vladimir Miklashevsky, a Helsinki-based economist at Danske Bank A/S. (DANSKE)

“The only support may come from manufacturing industries which are oriented toward domestic consumers,” he said by e- mail before the release. Companies such as carmakers and food producers focused on the local market will probably be the strongest performers, he said.

The central bank left interest rates unchanged for an eighth month on Aug. 10, saying monetary conditions had tightened and factors outside its control were spurring inflation.

Policy makers said in their statement a slowdown in industrial production last month doesn’t pose a risk of a broader economic deceleration because second-quarter manufacturing growth was strong.

To contact the reporter on this story: Scott Rose in Moscow at rrose10@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.