Russia: Despite improving, manufacturing PMI remains in contractionary territory in July; services PMI signals mild activity growth
The manufacturing Purchasing Managers’ Index (PMI) produced by IHS Markit edged up to 49.3% in July, from 48.6 in June. As a result, the index remained below the critical 50-point mark, signaling that activity in the manufacturing sector contracted for the third consecutive month.
July’s reading reflected a sustained deterioration in new business activity, amid softening demand conditions at home as well as abroad with new export orders slumping at the fastest pace in five months. In addition, output declined for a second consecutive month, weighed on by laxer purchasing power among households. Weak client demand also prompted a drop in backlogs of work. On a more positive note, Russian manufacturers increased workforce numbers for the first time in four months in July. Meanwhile, inflationary pressures softened considerably in July, with output prices hardly rising thanks to the slowest increase in input costs since February 2017 and greater discounting. Lastly, sentiment over future output fell to a one-year low in July.
Meanwhile, the IHS Markit Russia Services Business Activity Index rose to 50.4 in July, from 49.7 in June. As such, the index jumped above the critical 50-point mark, signaling a marginal improvement in business activity across the Russian service sector, chiefly thanks to an increase in new orders which propped up output growth.
Commenting on the report, Sian Jones, an economist at IHS Markit, noted that the overall demand dynamics remained weak in July:
““The Russian service sector signaled a slight bounce-back in July, with business activity and new orders returning to expansionary territory. That said, foreign and domestic client demand was lackluster. […] At the composite level, muted client demand weighed on growth as new business continued to decrease. Overall employment declined at the quickest pace since April 2016 as business activity rose only very slightly”.