Ukraine industry inches up 0.4% in October

Ukrainian industial output inched up 0.4% yoy in
October from a 0.3% yoy drop in the prior month, the State Statistics Service reported
on Nov 22. Chemicals (38.9% yoy growth vs. 33.4% yoy in Sept.), machinery (3.8%
yoy growth vs. 0.3% drop yoy) and metals (3.3% yoy growth vs. 2.2% yoy) drove
industry higher, while declines deepened for mining (-8.1% yoy vs. -2.8% yoy in
September) and utilities (-7.6% yoy vs. -3.4% yoy). In 10M17, industrial output
was still in the red, declining 0.2% yoy. 

Regionally, the deepest declines continued to occur in
the Ukrainian-controlled parts of the Luhansk (-55.0% yoy) and Donetsk (-14.8%
yoy) regions. Western regions kept performing strongly led by the regions of
Ivano-Frankivsk (16.1% yoy growth), Vinnytsia (11.2% yoy) and Lviv (11.1% yoy).

Alexander Paraschiy: Ukraine’s
industrial performance remains erratic. Metals grew mainly on the back of steel
production (5.9% yoy growth in October) and metal semi-finished products rolled
and forged (5.4% yoy), while other metal products were still in the red. 
Machinery grew predominantly due to more than a 400% surge in cargo railcar
production. Mining is still reeling from the Donbas trade blockade imposed by
the government in the spring as coal supplies plunged 25.4% yoy in
October. 

Remarkably, oil extraction (-11.1% yoy) is sliding, as
well as iron ore mining (-2.0% yoy) despite high resource prices. This trend
promises near zero industrial growth in 2017, or 0.4% yoy growth by our
projections. We expect the situation will improve in 2018 as the fallout from
the trade blockade wears off. For 2018, we project a 4.6% yoy industrial output
increase.