Russia PMI September 2019

Russia: Composite PMI broadly unchanged in September amid diverging trends in manufacturing and services sectors

The manufacturing Purchasing Managers’ Index (PMI) produced by IHS Markit dived to 46.3 in September, from 49.1 in August, marking the worst result since May 2009. As such, the index slipped further below the critical 50-threshold, signaling that the downturn in the manufacturing sector worsened, with activity contracting for the fifth consecutive month in September.

September’s deterioration was chiefly driven by shrinking output and new orders; both fell at the sharpest rates in over a decade amid weakening demand at home and abroad. In turn, firms cut their workforce numbers for a second consecutive month and saw their backlogs of work shrink further in September. Adding to the stream of negative news, sentiment regarding future output growth deteriorated in the surveyed month, although it remained in positive territory. On the price front, inflationary pressures softened in September, thanks to a stronger ruble.

Meanwhile, the IHS Markit Russia Services Business Activity Index jumped to 53.6 in September, from 52.1 in August. As a result, the index moved further above the critical 50-threshold, pointing to an improvement in business activity across the Russian services sector. The upturn was chiefly driven by firmer client demand, which supported new orders growth and caused backlogs of work to shrink. On top of that, employment rose for the first time in five months in September.

As a result, the HIS Markit Russia Composite Output Index ticked down to 51.4 in September, from 51.5 in August. The result pointed to a two-speed economy, as faltering manufacturing activity contrasted improving conditions in the services sector.

Commenting on the report, Sian Jones, an economist at IHS Markit, noted:

“At the composite level, private sector output and new orders were weighed on by contractions across the manufacturing sector, with overall new business levels unchanged from August. Although there seems to have been little contagion into the service sector so far, forward-looking indicators such as output expectations signal concerns among businesses towards the prospects for wider economic growth.”

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