Ukraine: Industrial production records best result in 14 months

In August, industrial production fell 5.8% over the same month last year, according to data released by the State Statistics Service of Ukraine. The result was a notable improvement from July’s 13.4% decrease and marked the most moderate contraction in 14 months. However, August’s result still marked the 20th consecutive month of decline amid the geopolitical tensions in the country. Significant contractions, however moderate in the context of recent data, were recorded in manufacturing, mining and quarrying, as well as in electricity, steam, gas and air conditioning.

The ongoing crisis between the Ukrainian government and pro-Russian separatist groups has had a large negative impact on industry, which is already weak. The conflict has been centered in the eastern regions of Luhansk and Donetsk, Ukraine’s industrial heartland, which have been plagued with steep contractions for the past year. However, in August, industrial output in Luhansk returned to growth for the first time in over a year and Donetsk recorded a comparatively mild 4.0% contraction.

On a monthly basis, industrial production fell a seasonally-adjusted 4.2% in August, which contrasted July’s 3.4% increase. The annual average variation in industrial output improved in August. breaking the uninterrupted downward trend that has been in place since May 2014 and rising from minus 18.6% in July to minus 17.4% in August.

FocusEconomics Consensus Forecast participants’ project that industrial output will plummet 14.3% in 2015, which is down 0.3 percentage points from last month’s forecast. For 2016, panelists expect industrial production to rise 3.2%.