Industrial Output Shows Unexpected 0.5% YoY Drop in August

02 Октября 2018

Ukraine’s nationwide industrial production declined by 0.5% year-on-year in August after 2.9% YoY growth in July and a growth of 2.2% YoY in June, according to data from the State Statistics Committee released last week. In the extraction sector, there was a 2.3% YoY output increase in August after a rise of 4.5% YoY in July. The manufacturing sector index edged down by 0.5% YoY while the utility sector’s output slumped by 6.4% YoY in August. Year-to-date through August, overall industrial production in Ukraine has risen by 2.2% YoY.

The surprising element in the August data is that manufacturing sector output declined, and this is the main reason behind the overall decrease in the industrial index for the month. In our view, the trend of declining output in the utility sector is actually a positive signal that Ukraine’s economy and industry are now consuming less electricity thanks to better energy efficiency. Several years ago the country’s economy was distorted in the energy sphere due to extremely cheap subsidized electricity pricing. With the liberalization of electricity prices since 2014, most businesses have turned to energy saving technologies. In individual sub-sectors which form the manufacturing output index, the steel production index rose by 1.7% YoY in August while the machinery sub-sector’s output fell 1.5% YoY. However, the machinery index’s year-to-date gain remains firm at 4.8% YoY (it had risen by more than 7% during full-year 2017).      
In some other encouraging macroeconomic data measuring Ukraine’s year-to-date performance, UkrStat said that the government’s agricultural production index rose 2.0% YoY, the construction index moved up by 5.7% YoY, and retail sales increased by 5.4% YoY in the January-August period.

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