Page 42 - RusRPTNov19

4.0 Real Economy 4.1 Industrial production
Rosstat reports that industrial production expanded 3% y/y in September, flat to August and in line with both our and the Bloomberg-compiled consensus forecasts.
Given that this September had one working day more than last year's, the calendar adjusted growth is close to +2.6% y/y, according to VTB Capital (VTBC).
The cold spell in September supported electricity consumption, which grew the most of the core IP industries.
Manufacturing expanded +3.2% y/y in September after +2.7% y/y in August. In September, there was y/y growth from electronic & optical products (+27.6%), pharmaceuticals (+15.7%), furniture (14.9%), tobacco, fabricated metal products and electrical equipment (+10.5%, for each), printing (+8.4%), beverages (+7.5%), food, rubber & plastic and chemicals (circa +5%).
The growth in non-metallic mineral products (most of, which are construction materials) did not disappoint either, rebounding from zero in August to +3.6% y/y in September.
Will construction surprise in 2019? As of October 7, the data on construction materials suggest that the construction sector's data for this year is likely to be revised up. At the end of last year there was a very big upwards revision in construction data that pushed up 2018 growth to 2.8%, versus the 1.3% growth the Economics Ministry is expecting this year.
However, the growth in the output of most investment-related goods, including vehicles (-2.5%), other vehicles and equipment (-3.7%) and other machinery and equipment (-10.1%), is still negative in y/y terms, which might be a not entirely positive sign for gross capital formation this year.
Finally, mining and quarrying saw y/y growth slow down. Most of the related positions, including crude oil, showed low dynamics. The one exception was the production of LNG (+33.6%), which is booming thanks to Novatek .
Basic sector output rose by 2.2% y/y in August, decelerating from 2.5% in July. The slower growth in August was mostly attributable to the agriculture and wholesale trade sectors.
Other sectors (except retail) showed slightly better y/y dynamics, but this was not enough to outweigh the slower growth in agriculture and wholesale trade.
Nevertheless, basic sector output increased by 2.3% y/y in July-August, up from the 1.7% y/y in 2Q19, thus indicating a possible pickup in GDP growth in the current quarter, although the acceleration will likely be moderate.
Deceleration in agriculture and wholesale resulted in slower economic
42 RUSSIA Country Report November 2019 www.intellinews.o