Ukraine industrial output growth slows to 1% in June

Ukraine’s industrial output increased 1.1% yoy in June
slowing from 5.4% yoy growth in May, the State Statistics Service reported on
July 22. Seasonally adjusted output declined 0.7% m/m in June.

In 1H21, industrial output increased 2.1% yoy (vs. a
7.6% yoy decline in 1H20).

Manufacturing output increased 2.0% yoy in June (after
an 8.0% yoy increase in May). In particular, the output in metallurgy slowed to
7.0% yoy growth (from a 12.2% yoy jump in May), and machinery output advanced
17.6% yoy (vs. 28.5% yoy in May). At the same time, food production dropped
16.3% yoy and chemicals declined 7.7% yoy.

Mining sector’s production slowed to 2.5% yoy growth
(from 6.9% yoy growth in May). In particular, coal production increased 3.5%
yoy, and iron ore production advanced 4.2% yoy. Meanwhile, oil and gas
production declined 1.3% yoy.

The supply of electricity & natural gas declined
5.5% yoy (vs. a 3.5% yoy decline in May).

Regionally, the highest industrial growth in June was
in Odesa (72.7% yoy%), Rivne (22.3% yoy) and Zakarpattia (21.3% yoy). Ten out
of 25 regions posted a decline of industrial output. It dropped the most in
Kirovohrad (-34.3% yoy), Ukraine-controlled Luhansk (-23.0% yoy), and Vinnytsia
(-12.9% yoy) regions.

Evgeniya Akhtyrko: The
industrial results in June are disappointing. The growth in metallurgy and
mining is slowing, as the effect of the low comparative base of the previous
year wears off and unutilized capacity reserves are being exhausted. Food
industry is unable to exit the downward trend even despite a healthy consumer
demand. Other important industrial sectors are failing to demonstrate a consistent
improvement.

With such a weak result for 1H21 we don’t see much
chance for Ukraine’s industry to be anywhere close to rebounding from the
fallout of 2020 (-4.5% yoy). If the combination of supply and demand doesn’t
improve substantially in 2H21, Ukraine’s industrial growth is likely to land
around 2% in 2021.