Industrial growth turns negative in March

Industrial production in Ukraine declined 1.1% yoy in March, taking 1Q12 growth to a mere 0.9% yoy, according to UkrStat. The machinery sector was the worst performer last month, posting a 5.6% yoy decline on disruptions in casting supplies to wagon producers and also due to weaker demand both domestically and externally. Metallurgy stayed in the red in March (-1.6% yoy) for the fifth consecutive month, while the chemicals industry continued to grow strongly (+9% yoy in March).

Vitaliy Vavryshchuk: Given lingering weakness on external markets and lackluster local investment demand, industrial production data was expected to be weak. A key positive takeaway from the generally neutral set of statistics was that performance of metallurgy stabilized and the sector maintained its rate of decline at about 2% yoy. We do not expect a major turnaround in coming months and hopes are that global markets will improve in 2H12, bringing Ukrainian industry up with them. We stick to our 2012E industrial growth projection of 2.9% yoy (vs. 7.3% growth in 2011), but now see downside risks to this forecast.