Russia’s August PMI manufacturing data puts in surprise increase

Russia’s August PMI manufacturing data puts in surprise increase
Russian manufacturing PMI goes back into expansion territory.
By bne IntelliNews September 1, 2016

The seasonally adjusted Markit Russia Purchasing Managers’ Index for manufacturers put in a surprise jump in August after contracting in July.

The index posted a 50.8 in August, where any number above 50 is an expansion, after putting in a disappointing 49.5 contraction in July. The manufacturing index has been lagging behind the services PMI which has been growing strongly for the last six months and hit a year-high of 55 in July. The service PMI has been taken as a harbinger for Russia’s economic recovery, but the contraction in the manufacturing index – negative results for six of the last eight months – says that the economy is struggling to take off.

Samuel Agass, Economist at Markit, which compiles the survey, said: “August’s headline PMI posted above the 50.0 no-change mark for only the second time since the start of 2016, after modest growth was recorded in both new orders and output. The rise in new business will come as welcome news to Russian manufacturers after experiencing stuttering demand conditions throughout 2016. Firms will now be hopeful that a steady sequence of expanding new business can be maintained throughout the coming months. However, with goods producers lowering both their headcounts and inventory levels, along with further declines in backlogged work occurring, future production growth may struggle to gain traction unless improvements in these areas can be made. Until that happens, the story of the sector’s inconsistent performance looks likely to continue.”

The August results will buoy Russia watchers as more evidence that this year’s economic contraction will be limited and Russia should return to economic health next year, as the Russian Ministry of Economic Development said in its latest forecast

The upturn in the sector was driven by modest production growth and higher new order intakes, Markit reports. However, workforce numbers contracted further while firms continued to lower their inventories throughout the month.

“For the fourth time in as many months, output at Russian goods producers expanded. That said, the rate of growth was only modest despite quickening since July. Although manufacturers recorded a higher volume of production, firms continued to reduce their post-production inventories. Moreover, finished goods stock has declined in each of the past 28 months,” Markit said in a press release.

Russia has record low unemployment at the moment of 5.3% of the work force, but manufacturers have been cutting jobs in an effort to optimise their production, the panellists told Markit.

Manufacturers are also under pressure from the rising cost of inputs; they have been reporting rising input costs in the last 91 monthly surveys including August.

“That said, the rate at which input prices rose in Russia’s manufacturing sector eased to a four-month low. According to anecdotal evidence, the rise in input costs reflected a combination of unfavourable exchange rates and higher raw material prices,” Markit said.

Russian goods producers raised their output charges further in August, extending the sequence of inflation to 13 successive months. However, the rate of increase slowed to a five-month low. This trend marries the Central Bank of Russia (CBR) efforts to reduce inflation which is expected to fall from the current 7.1% to 5% next year and 4% the year after.

Longer average lead times were reported in Russia’s manufacturing sector in August. Moreover, supplier delivery times have lengthened in each of the past 31 months, with panellists linking this to delays from European vendors.

Data

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss