Russia: Economic conditions deteriorate as PMI drops to 11-month low
July 1, 2019
The manufacturing Purchasing Managers’ Index (PMI) produced by IHS Markit slid from 49.8 in May to 48.6 in June, marking the third consecutive month of deterioration and the lowest reading since July 2018. As a result, the index moved further below the critical 50-point mark, signaling that activity in the manufacturing sector contracted for the second month running.
June’s reading reflected a downturn in new business activity which dropped for the first time in 10 months amid sliding real purchasing power of Russian consumers and weak external demand. This, in turn, led to falling output, which dipped for the first time in nine months. Softening client demand also prompted a faster depletion in backlogs of work and brought about another drop in employment after firms had already shed jobs at the fastest pace in over two years in May. Lastly, on the price front, input costs continued increasing in June, although the rate of inflation moderated to a near two-year low. Firms passed higher input charges on to consumer through higher output prices.
Commenting on the report, Sian Jones, an economist at IHS Markit, highlighted deteriorating sentiment in June:
"A second successive deterioration in operating conditions led to less robust output expectations towards the coming 12 months. The degree of optimism softened for the third successive month to a near one-year low amid lackluster client demand."
Author: Almanas Stanapedis, Economist