(Changes source, adds details, background, quotes)
By Toni Vorobyova
MOSCOW, March 16 (Reuters) - Russian industrial output posted the second fastest contraction in the series' seven-year history in February, but the pace of the slowdown eased a little from January, official data showed on Monday.
Output fell 13.2 percent year-on-year last month, after shrinking by a record 16 percent in January, data from the State Statistics Service. Analysts had forecast a 15 percent contraction in February output.
"In itself, the (Russian) number is very bad and very big, but it is better than expected," said Julia Tsepliaeva, chief economist for Russia and CIS at Merrill Lynch.
"But it is too soon to cheer, because in manufacturing the slowdown is much deeper than we expected. Such a serious contraction talks of a sharp slowdown in demand."
Manufacturing output shrank 18.3 percent compared to last year, with falls of 6.0 percent in extraction of raw materials and of 5.7 in production of electricity and gas.
Within manufacturing, lorries, cars, buses and tractors also saw production more than halved compared to last year as lack of credit has dried up demand and forced companies to idle plants and cut working weeks.
Cement output was down by a third, reflecting trouble in the construction sector.
In month-on-month terms, manufacturing rose 19.7 percent, possibly reflecting a greater number of business days compared to public holiday-filled January.
In the short term, some analysts said the slight slowdown in industrial output contraction could have been helped by an unexpected rise in month-on-month producer prices, the first in half a year.
Neighbouring Ukraine also showed a slight improvement in the pace of output contraction -- production slowed 31.6 percent year-on-year in February after shrinking 34.1 percent the previous month, data showed on Monday [ID:nLD200415].
Nonetheless, prospects for the rest of the year remain glum as Russia weathers its first recession in a decade.
Since the start of March, Ufaleynickel, Russia's third-largest nickel producer, shut down a furnace, while Toyota Motor Corp <7203.T> announced a one-week halt to production at its Russian factory.
Rail freight shipments, a broad indicator of economic activity, fell 26-27 percent in early March compared with a year ago, broadly in line with the previous month's performance, Deputy Transport Minister Andrei Nedosekov said on Monday.
For the year as a whole, the Economy Ministry forecasts a 5.7 percent contraction in industrial output while analysts expect it to shrink by 6.1 percent.
"It (the output data) suggests that investment demand is also small, so capital investment figures will be weak. And consequently economic performance as a whole will be quite poor," Tsepliaeva.
The statistics service provided the following data: Headline industry output Feb 09 Jan 09 Feb 08
mth/mth pct change +6.4 -19.9 +3.0
yr/yr pct change -13.2 -16.0 +7.5 Extraction of raw materials
mth/mth pct change -8.7 -3.0 -6.5
yr/yr pct change -6.0 -3.6 +2.3 Manufacturing
mth/mth pct change +19.7 -32.7 +11.2
yr/yr pct change -18.3 -24.1 +11.2 Production and distribution of electricity, gas, water
mth/mth pct change -8.6 +2.3 -9.9
yr/yr pct change -5.7 -7.0 +2.0
NOTE - For key Russian indicators click here <0#ECONRU>.