Russia's industrial output in June continued its recovery, expanding by 3.5% year-on-year in June, according to a report by Rosstat statistics agency on July 17. The figure matched the expectations of analysts surveyed by Reuters and continues the recovery that started earlier this year.

"This figure suggests that while weather conditions keep playing some role in pushing industrial growth up and is the main explanation of fast growth seen in May-June, the industrial activity is picking up seperately from the weather, which is a positive development," Alfa Bank commented on June 18. Mosocw has seen torrential rain in May and even a hurricane that killed 11 people. 

Industry continued its recovery in June, albeit moderating expectedly from 5.6% y/y jump seen previously in May on abnormally cold weather. In seasonally adjusted month-on-month terms industrial output declined by 0.5%, ending a sequence of three month of monthly growth.

For the second quarter of 2017 overall industry grew by 3.8% y/y versus 0.1% in the first quarter, and expanded by 2% y/y in the second half of 2017 overall, already reaching the 2% growth forecast for the full year by the Ministry of Economic Development.

"The strong dynamic of industrial output in 1H17 allowed us to improve our expectations of GDP growth from 0.5% to 1.0% y/y in 2017," Gazprombank said in a note on July 18.

Manufacturing in June moderated to 2.9% y/y growth from 5.2% y/y seen in May. Still, the growth was more robust than expected from a poor  manufacturing PMI survey result in June. Extraction kept posting strong growth of 5.2% y/y in June (5.6% in May).

Still, VTB Capital on July 18 warned that a slowdown was observed in almost all sub-segments which had previously driven the sectoral expansion in manufacturing.

At the same time, the output of passenger cars and freight wagons was on the rise in June, attributed by VTB to not only broadening consumption, but also to a "certain extent"  additional demand for light vehicles created by the car industry stimulus package, launched on 1 July.

Gazprombank also notes that "the structure of growth in manufacturing industry remains uneven, with growth leaders still related to oil & gas, transport and construction sectors relying on government contracts."

The bank sees persisting uncertainty surrounding the government’s approach to spending in the second half of the year, and mostly links the growth prospects for industrial production to a revival in consumption-oriented sectors.