After slipping in June to the lowest level 12-months, the Markit Russia Manufacturing Purchasing Managers’ Index (PMI) recovered to a six month high in July, Markit reported on August 1.

The seasonally adjusted Manufacturing PMI posted 52.7 in July, up from 50.3 reading in June, just above the 50.0 no-change mark, showing the fastest pace of improvement of business conditions in the manufacturing sector since January. 

“The latest PMI reading signaled a strong improvement in operating conditions in the Russian manufacturing sector in July,"  Markit economist Sian Jones commented, adding that growth in both output and new orders was solid, while backlogs increased at a record pace.

Panelists attributed July's upturn in production to higher client demand and a rise in new orders. New orders were anecdotally linked by local firms to new clients. 

While the pace of output price inflation remained weak, the panelists linked inflation to exchange rate fluctuations, especially against the US dollar, which increased the cost burdens. Notably, corporate profit indicators in April and May had also been hindered possibly due to currency fluctuations.

At the same time optimism in the sector in July was the lowest since January as manufacturing firms face uncertainty regarding future output. A decline in optimism in the sector was also confirmed by an independent survey of Gaidar Institute published by Vedomosti daily on August 1. 

“IHS Markit’s latest forecast places industrial production growth for the second quarter at 2.4% year-on-year, following broadly no change in the first quarter," according to Jones, who believes that  "fluctuations in growth seen in both official and PMI data support the overall industrial production expansion forecast of 2.0% in 2017”.