Russia: Business activity in Russian manufacturers and service providers drops at the end of the year
December 31, 2015
A drop in activity in the Russian manufacturing sector at the end of 2015 was disappointing news. The Markit’s Manufacturing Purchasing Managers’ Index (PMI) declined from 50.1 in November to 48.7 in December, which came in also below the 49.5 the markets had expected. The indicator fell below the 50-threshold that separates expansion from contraction, where it stood in the two months prior.
In a statement, Markit indicated that December’s fall reflected a contraction in output—the first in four months—as well as a decrease in incoming new orders and employment. In addition, Russian manufacturing firms saw a reduction in sales, which led to an increase in inventory levels. Moreover, price pressures persisted in the sector, with both input and output prices rising in the last month of 2015. Markit concluded that, “the headline PMI figure slipping below the crucial 50.0 mark will come as disappointing news to the Russian manufacturing sector, having seen a stabilization over the previous two months.”
Meanwhile, Russian service providers registered a sharp drop in December, following an increase in the previous month. According to Markit’s Services PMI, “December survey data signaled a worsening of the downturn in the Russian service sector.” The indicator dell from 49.8 in November to 47.8 in December, which mainly reflected a fall in new business, a drop in employment and a deterioration in businesses’ operating margins. With a drop in Russian service providers, pressures on operating capacity fell further in December. On the December drop, Markit commented that, “Russian service providers end 2015 on a dull note, as the headline figure registered comfortably below the 50.0 no-change mark. This will come as disappointing news to the sector, which looked to be veering towards stability in November.”
Author: Ricardo Aceves, Senior Economist