Ukraine industrial output declines 3.5% yoy in December

Ukraine’s industrial output declined 3.5% yoy in
December, accelerating from a 0.9% yoy drop in November due to falling
manufacturing, the State Statistics Service reported on Jan. 23. Seasonally
adjusted output decreased 0.2% m/m.

In 2018, industrial output increased 1.1% yoy (vs.
0.4% yoy growth in 2017).

Manufacturing output plummeted 8.6% yoy in December
(after a 2.5% yoy drop in November). In particular, machinery collapsed 16.8%
yoy while metallurgy declined 9.9% yoy. Food production declined 5.5% yoy.

Mining output improved 1.8% yoy in December (after
rising 1.1% yoy in November) due to growth of coal (11.4% yoy) and oil and gas
production (5.0% yoy). Meanwhile, iron ore production stayed at the same level
as in December 2017. The supply of electricity and natural gas increased 11.0%
yoy in December.

Regionally, growth was strongest in the Kirovohrad
(22.9% yoy), Rivne (15.5% yoy) and Vinnytsia (11.1% yoy) regions. Declines were
steepest in the Ternopil (-37.7% yoy), Ukrainian-controlled Luhansk (-27.0%
yoy), and Khmelnytskiy regions (-19.4% yoy).

In 2018, manufacturing output inched up 0.2% yoy. In
particular, metallurgy remained at the prior-year level, while production in
machinery inched up 0.4% yoy. Chemical production advanced 16.5% yoy, while
food output declined 1.9%.

Evgeniya Akhtyrko: December’s
failure drew 2018 industrial output to an unexpectedly low result. The weak
industrial performance was mostly due no advancement in metallurgy and very
little growth in machinery. Metallurgical output was affected by the
deteriorating situation on the external markets, while Ukrainian machinery is
suffering from weak domestic demand and the inability of Ukrainian producers to
reach new external markets (beyond Russia). In addition, the food production
industry failed to halt its negative trend despite the strong performance of
agriculture (boosted by a record-high grain crop).

We don’t see any factors that will help Ukrainian
industry break through its doldrums in 2019, with output likely to increase no
more than 2% yoy.