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Ukraine industry slumps 12% in July

Ukraine industry slumps 12% in July

19 August 2014

Ukraine’s industrial output slumped into two-digit decline in July, falling 12.1% yoy after a 5.0% yoy drop in June, Ukrstat reported on Aug. 18. Accelerated declines in metal production (-12.3% yoy vs. +5.6% yoy in the prior month), mining (-12.1% yoy vs. -4.8% yoy in June) and utilities (-7.8% yoy vs. -1.5% yoy) were the key factors in the worsened results. At the same time, contractions in machinery output (-23.8% yoy vs. -20.8% yoy) and chemical production (-22.2% yoy vs. -21.7% yoy) remained almost unchanged compared to the prior month.  The main contraction was reported in the Luhansk (-56.0% yoy) and Donetsk (-28.5% yoy) regions, where the government’s anti-terrorist operation continues. For 7M14, industrial output fell 5.8% yoy.

 

Alexander Paraschiy: The result is much worse than we anticipated. We understood that the intensified warfare in July would cause industry to fall faster but it wasn’t possible to anticipate the scale of the problem. Halved production in the Luhansk region and a 1/3 contraction in the Donetsk region means the problem is really serious. Heavy fights near Donetsk in early August promises more contraction in the upcoming months. Meanwhile, a transportation blockade of the Luhansk region means that its industrial output should fall much deeper as well.

 

Against this backdrop, even assuming a relatively quick finalizing of the anti-terrorist operation (in October, at the latest), we have to revise our industrial output forecast to -7.2% yoy from -5.1% yoy estimated previously for 2014. A delayed military victory will only strengthen the industry fall this year.

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