Russia: Private sector metrics improve as Services PMI jumps and Manufacturing PMI inches up in October
The manufacturing Purchasing Managers’ Index (PMI) produced by IHS Markit edged up to 47.2 in October from 46.3 in September, marking the second-worst result since May 2009. As a result, the index remained below the critical 50-threshold, suggesting that activity in the manufacturing sector contracted for the sixth consecutive month in September.
October’s slight improvement reflected a somewhat less sharp contraction in output. Nevertheless, the drop in production was one of the fastest in three-and-a-half years amid weaker client demand and a considerable downturn in new business. New orders contracted in October, reflecting falling export orders and frail domestic demand. In turn, firms cut their workforce numbers for a third consecutive month and saw their backlogs of work shrink further in October. On a more positive note, sentiment regarding future output growth improved in October and was firmly entrenched in positive territory. Lastly, on the price front, inflationary pressures continued to retreat in October and output prices rose only mildly.
Meanwhile, the IHS Markit Russia Services Business Activity Index jumped to a one-year high of 55.8 in October from 53.6 in September. As a result, the index moved further above the critical 50-threshold, signaling a marked improvement in business activity across the Russian service sector. The upturn was chiefly driven by sturdier new business growth, amid firmer client demand at home and from abroad.
Commenting on the report, Sian Jones, an economist at IHS Markit, noted that the services sector remained the key driving force behind the overall private sector activity growth:
“At the composite level, a stronger performance across the service sector underpinned overall business activity growth as manufacturing sector output remained in contraction. Meanwhile, historically subdued increases in costs and charges supported recent moves towards stimulus by Russia’s central bank, amid a larger than expected reduction in interest rates in October.”