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Russia: Business conditions in manufacturing and services sectors deteriorate in June

July 3, 2015

The manufacturing Purchasing Managers’ Index (PMI) produced by HSBC rose in June and gained some of the ground lost in May. The indicator rose to 48.7 in June from 47.6 in May. Despite the increase, the indicator continued to hover below the 50-threshold that separates contraction from expansion in business conditions in the manufacturing sector. HSBC stated that deteriorating conditions in Russia’s manufacturing sector continued, although it was more modest than in the previous month. Specifically, HSBC noted that manufacturing output was lower in June, particularly in the production of intermediate and investment goods but the mild increase in in June reflected an increase in consumer goods production as well as in new orders. HSBC concluded that, “still underwhelming demand is generally reported across the manufacturing industry and this unfortunately is leading to job losses. Moreover, a shortage of working capital means that firms have to utilize inventories whenever possible rather than purchasing inputs, the net result being constraints being placed on plant production.”

Simultaneously, the services Purchasing Managers’ Index (PMI) produced by HSBC took a sharp hit and fell from 52.8 in May to 49.5 in June. As a result, the indicator moved below the 50-threshold that separates expansion from contraction in business activity in the sector. HSBC stated that June’s drop occurred despite the increase in new business. HSBC commented that, “data for Russia continue to underwhelm, with slight falls in activity registered across the private sector in June. A spare capacity remains evident, jobs subsequently continue to be cut.”

FocusEconomics Consensus Forecast panelists see fixed investment contracting 2.9% in 2015, which is down 0.7 percentage points from the previous month’s estimate. For 2016, the panel expects fixed investment to increase 2.0%.


Author:, Senior Economist

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Russia PMI June 2015

Note: Markit HSBC Purchasing Managers’ Index (PMI). A reading above 50 indicates an expansion in business activity while a value below 50 points to a contraction.
Source: Markit and HSBC.


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