Ukraine industrial output drops 2.3% yoy in June

Ukraine’s industrial output dropped 2.3% yoy in June,
after increasing 1.6% yoy in May, due to a significant drop in manufacturing,
the State Statistics Service reported on July 23. Seasonally adjusted output
declined 1.3% m/m. In 1H19, industrial output climbed 0.5% yoy.

Manufacturing output fell 6.1% yoy in June (after 0.7%
yoy growth in May). In particular, machinery output plunged 13.3% yoy (vs. a
5.0% yoy decline in May). In addition, metallurgy output slid 6.0% yoy (vs.
6.5% yoy growth  in May) while food production slid to 3.7% yoy (vs. 0.7%
yoy growth in May).

Mining output improved 4.3% yoy in June (vs 4.6% yoy
growth in May). In particular, coal production advanced 9.4% yoy. Production of
electricity and natural gas increased 4.4% yoy in June.

Regionally, the steepest decline was observed in the
Khmelnitskiy (-21.9% yoy), Zakarpattia (-18.8% yoy) and Chernihiv (-17.1% yoy)
regions. The growth was strongest in the Vinnytsia (28.8% yoy),
Ukrainian-controlled Luhansk (14.0% yoy), and Sumy (12.1% yoy) regions.

Evgeniya Akhtyrko: This
industrial performance is frustrating with recent growth in the machinery and
metallurgical sectors switching to decline. And even more striking, the food
industry is failing to demonstrate production gains despite a surge in private
consumption.

At the moment, we do not see any factors that would
foster a significant acceleration in industrial production in 2H19. Given these
poor results in 1H19, our 2019 industrial growth projection of 2.0% (vs. 1.6%
yoy in 2018) might be too optimistic.