The Ministry of Economic Development has revised the target industrial output growth for 2018 to 1.7% from previous 2.5%, while stopping short of downgrading the GDP forecast of 2.1%, Interfax reported on April 16 citing unnamed sources in the government.

Together with the new round of US sanctions hitting hard in April, March's disappointing industry results could lead to across-the-board revision of outlook on Russia for 2018. The ministry's target of 2.1% growth for 2017 underperformed at 1.5% GDP growth last year. 

"All in all, under such a weak trajectory of industrial production output, it is little wonder that the Economy Ministry downgraded the GDP results for January-February from the initial readings of around 1.7% y/y... to the current figure of 1.5% y/y (1.7% y/y in January and 1.3% y/y in February)," Alfa Bank said on April 17.

Most notably, the slowdown in industrial output in March occurred despite the colder weather, which pulled natural gas and electricity production higher, VTB Capital commented on April 17, while manufacturing-driven slowdown continued.

Manufacturing industries’ output in March was back to the red (down by 0.2% y/y), after January’s uptick of 4.7% growth. 

"The data on the production of select items shows that the deceleration was common across industries, with the most visible contractions seen in construction materials, complemented by chemical industry and the output of vehicles and other transport equipment," VTB said.

Cold weather still managed to help the output in mining and quarrying, which was up by 1.4% y/y, the highest print since September 2017, "when the sector fell into a contraction owing to the high base effect of oil production in the run-up to the OPEC deal coming into effect."