Russia April Industrial Output Slowed Less Than Forecast

Russian industrial-output growth slowed as a stalling economy and weakening exports hurt demand.

Production at factories, mines and utilities grew 2.3 percent from a year earlier in April after a 2.6 percent increase in March, the Federal Statistics Service in Moscow said today in an e-mailed statement. The median estimate of 21 economists in a Bloomberg survey was for a 2 percent advance.

Stalled investment and a European recession that extended to a record sixth quarter are denting earnings at companies including OAO Severstal and OAO Novolipetsk Steel. Slower industrial growth after an unexpected increase in March show the central bank will remain under pressure to ease monetary policy after the economy grew last quarter at the weakest pace in more than three years.

“Underlying growth in manufacturing isn’t robust at all,” Vladimir Kolychev, head of research at Societe Generale SA’s OAO Rosbank unit in Moscow, said by e-mail. “The broad picture of fairly slow or slowing growth is unchanged.”

Manufacturing advanced 1.2 percent from a year earlier in April, down from 3.4 percent the previous month, according to the statement. Mining grew 2.6 percent while production at utilities increased 2.8 percent.

The 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 1.9 percent this year, compared with a 0.5 percent decline for the MSCI Emerging Markets Index. It was up 1.8 percent at 1,447.77 at 6:08 p.m. in Moscow.

Car Sales

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.

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.

Justified Policy

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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