Industrial output growth in Russia in August slowed to 2.7% year-on-year from July's 3.9% y/y growth but growth momentum was maintained, according to the date by RosStat statistics agency. 

Despite the slowdown the numbers exceeded the expectations with Reuters analyst consensus expecting 2.5% growth in August. In January-August overall Russia's industry expanded by 3.1%.

Slight industrial output growth deterioration in the reporting month is in line with the August manufacturing PMI reading, which was slightly up m/m to 48.9 from 48.1 in July, but still in the negative territory below the 50 no-change mark.

The result underlined the fragile nature of the economic recovery that has hurt industrial producers, although service providers have been doing much better and have been keeping the composite PMI index in the black for this year. All-in-all Russia’s manufacturing is keeping its head above water and slowly recovering.

According to the latest Rosstat data, extraction in August increased by 4.5% y/y versus 3.2% seen in July, driven by higher output and exports of oil supported by relaxing the Opec+ output cuts. At the same time the output of coal jumped by 11.5% in August, on the background of recent suggestions by the government to support the coal industry in the long-term.

Manufacturing growth, however, slowed down to 2.2% in August from 4.6% in July. "We believe that the uncertainty linked to the strengthening of sanction rhetoric towards Russia has negatively affected a number of key manufacturing sectors," Uralsib Capital commented on September 17.

Nevertheless, Uralsib analysts still expect moderate industrial output growth maintained in the coming months.