Russia: Manufacturing PMI dips in July
August 3, 2020
The Russia IHS Markit Manufacturing PMI fell to 48.4, from 49.4 in June. The deterioration contrasted June’s notable improvement which had marked the strongest reading in over a year. As a result, the index slipped further below the critical 50-threshold, signaling worsening operating conditions in the Russian manufacturing sector.
July’s deterioration chiefly reflected faltering demand conditions. Despite easing social distancing measures, the demand backdrop worsened at the outset of Q3, as clients abroad and at home were hesitant to place new orders amid lingering uncertainty. This contrasted a sustained increase in production, as companies continued to ramp up output following the lifting of lockdown measures. Meanwhile, manufacturers reduced their workforce numbers further in July, chiefly due to spare capacity
and drying new order inflows. With regards to prices, shortages of raw materials and a weaker ruble pushed input costs higher, while output prices remained broadly stable. On a more positive note, sentiment picked up to a six-month high on hopes of a return to pre-pandemic output levels over the long term.
Commenting on the manufacturing sector outlook, Sian Jones, an economist at IHS Markit, said:
"The Russian manufacturing sector took a step back in July, as new orders struggled to maintain momentum. Although output expanded, manufacturing sales fell back into contraction […]. While it is encouraging to see confidence improving among goods producers, our latest forecast is a 6.4% annual contraction in industrial production in 2020 and a slow recovery in output to pre-pandemic levels."
Author: Almanas Stanapedis, Research Team Manager