Key economic sector stats in August

According to official statistical reports on the key economic sectors released over the past week through yesterday, real GDP declined 2.9% YoY in 1H14, signalling a deepening recession, and it is expected to deepen further in the second half in real terms than was seen during the first half. The Crimean annexation and ongoing Donbass war that raged until the recent ceasefire agreement heavily damaged economic activity in the Donbass region. In August, industrial production nearly halted in the Luhansk oblast, while in Donestk it nearly halved as steel mills in the city of Mariupol remained under Kiev's control and was free of active military battles. As the chart below shows, in seasonally adjusted terms (SA'd), the industrial production index reached a record low this August. Historical data beginning from December 2006 was at 65 points. At the end of 2008, it dropped as low as 70 points. (Note: back in 2008, this data accounted for Crimea, which had an IP sector share of 2.4%). Retail trade also declined as high inflation eroded purchasing power. The seasonally adjusted monthly volume of retail trade (excluding open market retail trade) slowed further in August from the previous month by accelerated rate of 5.4% MoM or 19.4% YoY. In transport, seasonally adjusted cargo deliveries experienced a very sharp drop in year-on-year terms in August of 25.0%, being more or less steady over the entire year so far. Seasonally adjusted passenger transportation data also showed a double-digit decline last month of 20.9% YoY, albeit it has steadily declined since March due to the Crimea annexation and then the Donbass war. The construction sector hit a record low by volume of work done last month, down 33.5% YoY seasonally adjusted. The entire services sector was also down seasonally adjusted as the monthly volume of services in August (at constant prices) dropped 0.9% MoM and 9.8% YoY. In sum, the economy appears braced for a sharp fall in 2H14 of 15% YoY and a 9-10% decline in 2014. If the Donbass war resume or the Kremlin starts a surprise event of geopolitical aggressiveness that further undermines Ukraine's economy, we would downwardly revise our forecast of the real GDP contraction in 2014 toward the 10-12% range.

Источник: ICU