Industrial output fall eased to 4.0% y/y in May from a 5.6% y/y drop the previous month, according to the latest figures by BiH statistical office. In seasonally-adjusted terms, the industrial production increased by 2.0% m/m following a 1.8% m/m fall in April.
Detailed breakdown shows that the deceleration of the headline print decline came on the back of the utilities production that fell by 2.2% y/y in May, slowing down markedly from a 22.2% y/y drop the month before. The print will likely continue to improve with the better hydrological situation and after the 300MW TPP Gacko was reconnected to the grid on Jun 23-24. Otherwise, the fall of the output of the heavily-weighted and export-oriented manufacturing sector deepened to 4.0% y/y in May from 0.8% y/y decline in April. The steepest annual decline was seen in manufacturing of coke and refined petroleum products, probably due to the overhaul in Brod oil refinery, as well as in production of textiles and of tobacco products.
Mining output fall also deepened to 9.0% y/y in May from 3.1% y/y fall the previous month dragged by lower mining of metal ores and of other mining and quarrying. The mining print could worsen further if ArcelorMittal Prijedor proceeds with its plan to reduce iron ore production to 1.0mn tons from 1.5mn tons as of September. Note that yesterday miners observed a one-hour warning strike against the plan threatening with halt of production if their demands were not met.
Industrial production fell by 5.0% y/y in Jan-May. Manufacturing output dropped by 1.9% y/y in the period, mining output was down by 4.5% y/y, while utilities output – by 13.3% y/y. We expect poor external demand to keep on weighing on the manufacturing production, hence on the headline print.