Russia: Manufacturing and services PMIs hint at gradual recovery
June 3, 2016
After three months of deterioration, business conditions in the manufacturing sector improved moderately in May. The Manufacturing Purchasing Managers’ Index (PMI) elaborated by Markit rose to 49.6 in May from 48.0 in April. As a result, the index moved closer to the 50-threshold that separates contraction from expansion in the sector.
According to Markit, the index continued to show contraction in the sector mainly due to a further drop in new orders. However, Markit commented that manufacturing production returned to growth in May and, consequently, job creation was evident for the first time in 35 months. Additionally, survey data reported a first increase in firms’ purchasing activity, while pre-production inventories fell. Regarding prices, respondents to the May survey signaled that they increased their output prices for the 10th consecutive time, which was the result of a further increase in production costs. Commenting on Russia’s Manufacturing PMI, Martkit stated that, “Survey data for May continued a disappointing 2016 for Russian goods producers, as business conditions deteriorated further. The headline PMI has now pointed to a downturn in the sector in each of the past six months, yet the latest reading suggested that conditions were moving closer to stabilization.”
Business activity in Russian services providers continued to increase in May, but the pace of growth slowed from the three-year high registered the previous month. Markit’s Services PMI fell from 54.2 in April to 51.8 in May, which was the first decline after three consecutive increases. Markit said that May’s deceleration was the result of a slowdown in new orders and a further decrease in employment. Growth came on the back of solid growth in new business intakes. Regarding prices, services providers reported increases in both input costs and output charges and continued to maintain a relative positive outlook in May. Commenting on recent developments, Markit said that, “The Russian economy has been making steady progress so far in 2016, with the latest surveys suggesting that this positive start to the year was built upon in May. Although growth slowed slightly in the service economy, its recovery extended into a fourth month. Manufacturing also showed better signs, with a slight increase in production taking the sector out of its recent downturn.”
Author: Ricardo Aceves, Senior Economist