OREANDA-NEWS. October 19, 2010. Rosstat released September industrial production and PPI data. Industry’s 1.5% MoM growth was disappointing, as we expected to see far more robust growth of (3.5% MoM) driven by an increase in output after the disruption in production during the summer heat wave. Annualized growth came at 6.2% YoY in September and 8.9% YoY for 9M10. Meanwhile, September PPI revealed an unexpected slowdown of -1.3% MoM – consensus was for a 1.5% MoM increase, reported the press-centre of OTKRITIE Financial Corporation.

View: A breakdown of the industrial data shows that there was no major change in drivers, with the manufacturing sector leading the way (up 9.4% YoY in September). Resource industries continued to disappoint as their growth rate slowed last month to just 0.5% YoY (4.2% YoY in 9M10). Output in the automotive and construction materials’ industries showed the most significant gains, helped by the government ‘cash-for-clunkers’ scheme and a seasonal rise in private building activity.

We expect the manufacturing industry to continue leading the recovery. Output in the resource sector has the potential to show more strength going forward as seasonal demand for energy products rises. We forecast industry growth of 8.9% YoY in 2010. The September slowdown in the PPI rate was primarily driven by a 7.3% MoM drop in wholesale energy prices. However, food producer prices demonstrated a 2.3% MoM gain, which sends a rather negative signal to the future CPI dynamic. We expect CPI to exceed the 9% YoY level by the end of this year.