Ukraine industrial growth speeds up to 3.8% yoy in June

Ukraine’s industrial output sped up to 3.8% yoy growth
in June from 1.2% yoy in the prior month, the State Statistics Service reported
on July 21. All core sectors improved except for utilities, which fell 9.6% yoy
and were flat from May. Machinery sped up to 15.7% yoy growth from 14.7% yoy in
May. Metals output turned positive at 1.8% yoy growth after four months of
decline. Chemical production also grew (1.0% yoy growth) for the first time
since September, or eight months in the red. Mining inched up 0.7% yoy with
coal extraction (7.2% yoy growth) leading this growth.

By geography, the strongest decline was in the
Cherkasy region, central Ukraine (-8.4% yoy) and in Kyiv (-4.2% yoy) in June.
The strongest growth was in Odesa region (43.9% yoy growth) and the Rivne region
in western Ukraine (28.4% yoy). The war-torn Donetsk and Luhansk regions still
are in the red (-4.3% yoy and -2.0% yoy, respectively), but this decline is
very modest compared to the double-digit contraction over the last four months.

In 1H17, industry was still in the red at a 0.4% yoy
decline.

Alexander Paraschiy: Industry
has finally begun to overcome the adverse impact of broken relations with
occupied Donbas. At the same time, the exceptionally good results in coal
mining should not be exaggerated as they were prompted by a low comparative
base. In June 2016, Ukraine experienced a short-term trade blockade with
occupied Donbas, initiated by the occupiers.

Certainly, there’s still some volatility and
stagnant sectors. However, it looks as though Ukrainian industry has finally
turned the corner and that from this point forward, output will be in the
black, perhaps except for coal mining. In fact, industrial growth is in line
with our 2H17 expectation for 3-4% average monthly growth, which means our
projection of 1.4% yoy industry growth for the year is on track.