UPDATE 1-Russia industry output growth slows in record heat

* Output grows at slowest rate since November

* Manufacturing deteriorates vs June

* August expected to be worse, improvement eyed in autumn

(Adds comments, market reaction)

MOSCOW, Aug 16 (BestGrowthStock) – Russia’s industrial production
growth slowed to an eight-month low in July as manufacturers cut
output in the face of the worst heatwave on record, and analysts
braced for worse to come.

Output grew 5.9 percent year-on-year, the slowest since
November, data from the Federal Statistics Service showed.
Analysts polled by Reuters had expected growth to slow to 8.0
percent after a 9.7 percent rise in June. [ECILT/RU]

Manufacturing fared the worst, falling 0.4 percent
month-on-month as outputs of meat, bread, buckwheat and
agricultural machinery fell.

“We had expected a slowdown due to the heat and the
drought,” said Alexandra Evtifyeva, economist at VTB Capital.

“August will likely be even worse, and then we will probably
return (to normal)”.

The record heatwave has killed off around 40 percent of
Russia’s crops through drought, and has clouded Moscow in toxic
smoke from peat fires, causing consumers to flee the capital
this month.

“The heat made its impact. But even without the heat, a
slowdown is logical. It could be linked to falling export and
the fall in the pace of economic growth in other countries,”
said Nadezhda Ivanova, economist at Sberbank.

Within the data, however, there were some bright spots —
production of cars, fridges and dishwashers grew strongly on the
year, reflecting an ongoing recovery in consumer demand.

Energy production rose 3.9 percent on the month, likely
pushed up by increased usage of air conditioning and fans to
combat the record high temperatures.

AUTUMNAL IMPROVEMENT?

The scale of the slowdown still did not look deep enough to
prompt action from the central bank, economists said, and the
rouble (RUB=: ) and Russia’s stock markets (.MCX: ) showed little
reaction. [ID:nLDE67F10R].

“Most likely the negative impact of the heat will be made up
for in the autumn months,” said Maxim Oreshkin, analyst at
Credit Agricole.

“This data does not mean an end of the recovery trend.”

Oleg Zasov, acting head of the macroeconomic forecasting
department at the Economy Ministry agreed:

“Clearly, August will be lower. Clearly, people took more
holidays now, and that means it could be recouped in other
months,” he said, adding that a slowdown in growth in July was
also in part due to a less favourable base effect.

Analysts estimate that Russia may lose up to 1.0 percentage
point of economic growth as a result of the heat and fires.
[ID:nLDE67902C] Before the heatwave, the economy had been
expected to grow around 4 percent this year, after experiencing
its worst recession in 15 years in 2009.

— For a TABLE on the data see [ID:nMSC000036]
(Reporting by Darya Korsunskaya, Vlasta Demyanenko and Toni
Vorobyova; editing by Patrick Graham)

UPDATE 1-Russia industry output growth slows in record heat