* July Y/Y contraction smallest in 5 months
* Industrial output to be affected by dam accident
(Adds analyst comment, details)
By Darya Korsunskaya and Denis Dyomkin
MOSCOW/ULAN-UDE, Russia, Aug 24 (Reuters) - Russia's economy grew 0.5 percent in July month-on-month, data showed on Monday, giving hope the recession might be coming to its end, but officials warned it is too soon to say the crisis is over.
Investors are looking for signs of green shoots after low oil prices, falling world demand for its exports, investor risk aversion over emerging markets and the global credit crunch pushed Russia into its first recession in a decade this year. "In July we can say with greater certainty that the overall slowdown in the economy has ended, and it is moving to a phase of reanimation," Deputy Economy Minister Andrei Klepach -- the first official to admit the economy was in recession last December -- told reporters.
"But the recovery is neither surefooted nor intense. In this sense, as they say in the West, the recession is over but the crisis remains."
The comments chime with First Deputy Prime Minister Igor Shuvalov, who told Reuters on a visit to the Siberian city of Ulan-Ude that economic growth had resumed but it remained to be seen how well it would hold up. [ID:nLO420935]
There was also some good news on the corporate front, with
Russia's second-biggest oil firm, LUKOIL
July's economic growth, unadjusted for seasonal effects, follows a smaller month-on-month increase in June, Kleapch said.
"In industrial output, we have seen growth for two months already. But the fact that Klepach has confirmed this is also good, although I also understand the cautious optimism," said Aleksandra Evtifyeva, analyst at VTB Capital.
"We are much more optimistic than the Economy Ministry. The July data once again show that the economy is recovering."
In year-on-year terms, Russia's economy is not expected to return to growth until 2010 due to the steepness of the contraction it has experienced so far. GDP shrank 9.3 percent in July -- its smallest year-on-year contraction since February.
June's fall was revised to 10.1 percent from 9.6 percent.
RECOVERY TO SLOW?
But the pace of recovery could well slow in the next few months, affected -- among other things -- by an accident on the Sayano-Shushenskaya hydroelectric power station that is expected to take at least three years to repair. [ID:nLN283598]
"We think that manufacturing has passed its bottom ...(but) we do not exclude that, in the future, there could be a pause in the improvement," Klepach said.
"In September (truckmaker) Kamaz
Officials have previously said the early autumn could also bring a rise in unemployment, as seasonal workers are laid off and new graduates struggle to find jobs.
Inflation will ease to 0.3-0.4 percent in August from July's 0.6 percent and, in September, price pressures could moderate further, though deflation is unlikely, Klepach said.
That would potentially leave the central bank scope to press on with interest rate cuts in a bid to promote economic growth.
On the flip side, an improvement in economic indicators could lessen the need for future monetary easing, while the recent bout of rouble weakness could also make the central bank more cautious so as not to destabilise the currency.
The rouble strengthened by around 0.5 percent to 37.63
versus a euro-dollar basket on Monday