Industrial output turns negative in December

Monthly industrial production turned negative in December, falling 0.5% yoy, but was up 0.4% mom, UkrStat reported yesterday. Fullyear industrial growth was still strong at 7.3% yoy, but was mainly due to hefty gains in 9M11 when external demand remained robust. Monthly output in all of Ukraine’s major industries, except machinery, declined in December: metallurgy -4.7% yoy, chemicals -1.1% yoy and food processing -0.5% yoy.

Vitaliy Vavryshchuk: While the weak performance in export-oriented industries was broadly expected, the decline in food processing output was a surprise, especially against the backdrop of last year’s bumper harvest. Industrial production will struggle to stay in a positive territory in 1H12, but could fare better in the second half of the year if external demand improves. Machinery output is likely to rise only marginally in 2012 against last year’s high base, while the chemicals industry will likely suffer from expensive gas, its key input. Metallurgy output might dip marginally into the red this year, as continued weakness in steel prices indicates the outlook for steel demand remains highly uncertain. Overall, we see industrial production decelerating to 2.9% growth in 2012.