Russia: Manufacturing conditions continue to deteriorate sharply in May
June 1, 2020
The Russia IHS Markit Manufacturing PMI rose to 36.2 in May from an all-time low of 31.3 in April. That said, the index remained well below the critical 50-threshold, signaling the second-sharpest deterioration in operating conditions across the Russian manufacturing sector since early-2009.
May’s result reflected a slightly softer, albeit still severe, contraction in Russian manufacturing production, amid the constraining impact of measures implemented to tackle the Covid-19 pandemic. Weak demand conditions both at home and abroad weighed on manufacturing output, while eviscerated consumer demand due to lockdown measures drove a sharp contraction in new orders. In response to deteriorating economic environment, manufactures cut their workforce numbers further in May, amid evaporating backlogs of work. On the price front, a weak ruble and higher supplier charges fueled input costs, with firms passing the increased cost burden onto consumers through higher output prices.
Commenting on the manufacturing sector outlook, Sian Jones, an economist at IHS Markit, said:
"Manufacturers do not foresee conditions improving over the next year, as expectations turned pessimistic for the first time on record. Our current forecast for industrial production signals year-on-year contractions in output until the second quarter of 2021. Fears of a prolonged recovery partially drove a marked fall in employment as excess capacity increased."
Author: Almanas Stanapedis, Economist