Russian Industrial Output Probably Slowed in June: Week Ahead

By Alex Nicholson and Emma O'Brien

July 14 (Bloomberg) -- Russian industrial production growth slowed in June because of a traditional summer lull and a decline in state manufacturing orders, the Federal Statistics Service may say this week.

The annual rate slipped to 6 percent from 6.7 in May, according to the median of 21 forecasts in a Bloomberg survey.

State orders for goods have lost momentum since government changes carried out in early May, said Vladimir Tikhomirov, chief economist at UralSib Financial Corp. in Moscow. Vladimir Putin, appointed prime minister on May 8 after leaving the presidency, moved officials from the Kremlin into new roles in government.

``In summer, activity slows,'' Tikhomirov said. ``It's nothing catastrophic. We expect to see an acceleration in the second half.''

The economy of Russia, the world's biggest energy exporter, grew 8.5 percent in the first quarter, the second-fastest pace since 2000, as annual investment growth averaged more than 20 percent in the first three months, spurring expansion in the construction and retail industries. Industrial production rose to a nine-month high of 9.2 percent in April.

The Federal Statistics Service is scheduled to release industrial production data on July 16 or July 17.

Company News

In corporate news, the new board of OAO GMK Norilsk Nickel, with billionaire Vladimir Potanin as chairman, meets on July 14 to discuss the long-term strategy of Russia's biggest mining company.

United Co. Rusal, which owns 25 percent in Norilsk and wants to combine with the nickel miner, said last week the board's lineup was skewed in favor of Potanin. Rusal wants to re-elect it and expand it to 13 from nine at a special shareholders' meeting.

Mikhail Prokhorov, the billionaire who together with Potanin acquired Norilsk from the state in 1996 and is now a Rusal shareholder, said on July 10 he would consider returning as chief executive officer of the nickel miner.

Evraz Group SA, Russia's second-largest steelmaker, will release a trading update on production on July 15.

VTB Group, Russia's second-biggest bank, may say profit in the first quarter dropped on trading losses.

Markets

Russia's benchmark Micex stock index declined for a third week, falling 2.7 percent, led by OAO GMK Norilsk Nickel, Russia's largest mining company, on concern global demand for steel will decline. OAO Gazprom, the world's biggest gas company, slid 3.9 percent in the week to 306.19 rubles.

The ruble strengthened 0.3 percent against its dollar-euro basket last week as the central bank said it expanded the currency's trading range for the second time in a month. The ruble advanced as much as 0.4 percent on July 10 to a record 29.4001. Bank Rossii purchased as much as $3 billion to weaken it again later in the day, according to Trust Investment Bank estimates.

The currency was at 29.4389 to the basket by the end of last week, after it slipped 0.3 percent to 36.9980 per euro, and gained to a nine-year high of 23.2260 per dollar bringing its rise from July 4 to 1 percent.

Russian government bonds climbed last week, as the central bank boosted its key interest rates July 11 by a quarter- percentage point for the fourth time this year.

The yield on the benchmark 7.5 percent bond due in March 2030 was at 5.54 percent by July 11, from 5.69 percent a week earlier. The yield on the 8.25 percent note maturing in March 2010 was at 5.49 percent, from 5.52 percent on July 4. Bond yields move inversely to prices.

The following is a list of events in Russia this week:

OAO GMK Norilsk Nickel board meeting              July 14
German Economy Minister Gloss Arrives in Russia   July 14
Evraz Group SA trading update                     July 15
Russian consumer price growth update              July 16
Russian industrial production update              July 16 or
later
VTB Group reports first-quarter profit            July 16

To contact the reporter on this story: Maria Levitov in Moscow at mlevitov@bloomberg.net