Russia's industrial output growth surged to 4.1% year-on-year in February, after 1.1% posted in January, according to the most recent data by Rosstat agency.
In calendar and seasonally adjusted terms industrial output grew by 1.2% month-on-month in February and 2.6% y/y in January-February overall.
Sberbank CIB sees the February industry growth as "healthy", with mining and manufacturing being the main growth drivers. Mining and quarrying added 5.1% y/y in February, albeit the growth rate slowed for all the main components.
Extraction of oil and gas we up by 3.5% and 4.7% y/y, respectively, while coal output was down by 0.2%. "The OPEC+ deal and Russia's commitment to it will likely ensure slow production growth in this segment over the rest of the year," the bank forecasts. Russia’s oil and gas shares are also the worst performing this year, up only 7% last week YTD compared to 12% for the overall market and 16% for financials. Oil stocks out performed in 2018 on the back of recovering oil prices.
In the meantime, manufacturing saw a "remarkable upturn in February", expanding 4.6% y/y versus a 1% decline seen in January. Such components as construction materials, metals, food products and machinery all posted strong y/y growth in February, also supported by an extra working day as compared to 2018.
Sberbank CIB now expects industrial production to pick up in 2H19 "thanks to increased government spending and reach 3% for the full year."
Russia’s industrial sector has been spluttering in 2018 and while it has made gains they are far below potential. The results have been weighed down by a number of factors; despite a controversial upgrade to 2.3% growth in 2018, growth was held back by the lack of private investment, soggy commercial borrowing and real incomes in Russia that fell again slightly in 2018, down for the fifth year in a row.
Russia’s manufacturing industry grew by 2.6% in 2018, Industry and Trade Minister Denis Manturov said during a working meeting with President Vladimir Putin on February 25.