Russian April Industrial Output Growth Probably Slowed

Russian industrial production probably grew more slowly in April than in the previous month as a stalling local economy and weakening exports hurt demand.

Output at manufacturers, mines and utilities grew 2 percent from a year earlier after a 2.6 percent increase in March, according to the median estimate of 21 economists in a Bloomberg survey. The Federal Statistics Service in Moscow is scheduled to report the data today or tomorrow.

The economy of the world’s largest energy exporter grew last quarter at the weakest pace in more than three years as a recession in the euro area extended to a record. Weaker demand for metals dented earnings at companies including OAO Severstal and OAO Novolipetsk Steel.

“We’re not expecting a contraction in industrial production because there’s nowhere further to fall,” Dmitry Dolgin, an economist Alfa Bank in Moscow, said by phone. April’s data will probably show “inertia” among producers, he said.

Russia’s economy grew 1.6 percent from a year earlier in the first three months of the year, decelerating for a fifth quarter, the statistics service said last week. The benchmark Micex Index of 50 stocks has fallen 3.5 percent this year, compared with a 0.8 percent decline in the MSCI Emerging Markets Index.

Deteriorating domestic demand has taken a toll on carmakers, with sales of new vehicles dropping 8 percent in April from a year ago, according to the Association of European Businesses in Russia. That was the biggest drop since February 2010, according to data compiled by Bloomberg.

Construction Outlook

The deterioration in car sales contrasts with a 9 percent increase in cement production in April, which suggests a pickup in construction, said Jacob Nell, Moscow-based chief economist for Russia at Morgan Stanley.

“The cement number is more likely to be a good guide to what’s happening in the economy,” Nell said in a phone interview. “After a number of years of high oil prices and full unemployment, you’d expect to see a pickup in construction.”

President Vladimir Putin ordered senior policy makers including Elvira Nabiullina, who takes over as Russia’s central bank chairman next month, to draft plans to bolster economic growth.

While officials including Economy Minister Andrei Belousov have argued that high interest rates are stifling output, Putin called the central bank’s stance justified as it seeks to bring inflation back down to this year’s target range.

“It’s really in doubt whether industrial production can expand faster than 2.5 percent without a change in the domestic economic environment,” said Dmitry Savchenko, an analyst at Nordea Bank AB in Moscow. After the contractions earlier this year, Nordea’s forecast for a 1.5 percent advance “may seem optimistic.”

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