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Russia’s Industry Growth Reaches Two-Month High, Beats Forecasts

Russian industrial production grew at the fastest pace in two months in July, beating economist forecasts as manufacturing accelerated.

Output at factories, mines and utilities expanded 3.4 percent from a year earlier, up from 1.9 percent in June, the Federal Statistics Service in Moscow said by e-mail today. The median of 15 estimates in a Bloomberg survey was for 2.5 percent growth. Manufacturing expanded at the fastest pace since February.

The economy of the world’s largest energy exporter is weathering the debt crisis in the euro area, which accounts for about half of its 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,” Alexey Pogorelov, an economist at Credit Suisse AG in Moscow, said before the report.

The Micex Index of 30 stocks fell 1.8 percent to 1,435.93 as of 3:32 p.m. in Moscow. The ruble-denominated benchmark gauge has advanced 2.4 percent this year, lagging behind a 6.2 percent gain for the MSCI Emerging Markets Index.

Manufacturing saw the biggest advance in July, with output growing 5.7 percent from a year earlier, up from 3.4 in June, the service said. Production at mines advanced 0.9 percent in July, from 0.2 percent in June. Output growth at utilities slowed to 0.8 percent from 2.1 percent in June.

GM, Volkswagen

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 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.

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 Inc. (AA) 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)

‘Only Support’

“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

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