Russia: Manufacturing PMI dives in June, signaling deteriorating conditions
July 1, 2021
The IHS Markit Manufacturing Purchasing Managers’ Index (PMI) fell to 49.2 in June, from May’s over two-year high of 51.9. June's result marked the weakest reading since November 2020. Consequently, the index slipped below the 50-threshold for the first time this year, signaling a mild deterioration in business conditions compared to the previous month.
The downturn was chiefly led by faltering local demand which drove a renewed decline in new business, mostly stemming from reduced purchasing power among consumers due to soaring price pressures. Similarly, new export orders shrank at the quickest rate for five months. In turn, output growth slowed and was only marginal at the end of Q2, while backlogs of work fell sharply and employment levels declined. In terms of prices, supplier shortages and unfavorable exchange rate movements kept pressures elevated, with output charges recording another marked increase as firms sought to pass rising costs onto consumers.
Commenting on the result, Siân Jones, a senior economist at IHS Markit, said:
"The Russian manufacturing sector took a step backwards in June, as weak domestic and foreign client demand weighed on the overall sector performance. Although some firms reportedly started to build stocks of finished goods, reduced pressure on capacity led to the first round of job cuts in 2021 so far. […] Nonetheless, firms' output expectations remained upbeat amid hopes that demand conditions will tick higher in the year ahead. Our current forecast expects industrial production to rise by 4.3% year-on-year in 2021."
Author: Almanas Stanapedis, Research Team Manager