Updated July 24, 2008

   According to Rosstat data for June (Federal State Statistics Service), industrial production index for the first 6 months of 2008 totaled 105,8% as compared to the analogical period last year – 100,9.

   In July was expected production rates' reduction; however, assessment of June to corresponding month last year was overall surprising.

Analysts consent that the reason of such low growth assessment of industrial production in June is practical peculiarities of economic measuring and its adjustments used by Rosstat.

In general, there are some differences in estimations of Rosstat and CEK (Center for economic situation); however, they do not exceed 2-3 percentage points on the average. So, for instance, May to May, 2007 totaled 103,7% as per CEK (Rosstat – 106,7%), June – 104,8%. Thus, industrial production index should have totaled around 106-107% in July.

   In 2008 the core driver of production sector growth were processing units, as their rates, despite stagnating mining, totaled 104% in January, and within the following months, May inclusive, were at 10% level and more.

The June estimation concerning processing units, and that is another explanation of such low growth rates of production sector, totals 100,6% to the analogical period last year. Such low rates look rather strange on the background of the following indices: growth rates of common brick production totaled 106,3% in June to June, 2007, structural steel production – 137,5%, production of steel wall and roofing panels – 142%, production of gas turbines – 178,8%. Moreover, production of tractors (167,6%) and cars (124%) demonstrates high growth rates as well.

   Industrial production dynamics based on seasonally corrected data of CEK is more obvious. Actually, growth of production sector rates to previous month continues to grow and totals 8,94% in June in annual terms.

However, as compared to previous month it increased by less than 1,5 percentage points, while within previous two

months this increase totaled from 2,5 to 4 percentage points.

Expert comments
Alexander Osin, Finam Management Company top-economist

One should foremost mark that Rosstat orients to data of enterprises that do not present it rather quickly.

As a result, there are some errors.

However, if we take all parameters into account, it seems that June is not a successful month for the Russian economy. It is related to a number of fac tors.

For instance, one can mark large number of holidays related to EURO 2008.

Moreover, one more thing – holiday season shift. Now the Russians prefer to take holiday in June, but not

in July-August, and that affects production activity.

Moreover, one should take into account the accumulated negative point.

On the o

ne hand, liquidity crisis impedes recourses attraction to develop business, and that slows down growth rates of industrial production.

On the other, dollar weakening to ruble and high inflation in Russia result in reorientation to import reducing sales of the Russian companies.