Russia PMI June 2016

Russia

Russia: Russian manufacturing returns to growth in June

July 1, 2016

The Russian manufacturing sector is heading into the second half of the year on the right footing. The Markit’s Manufacturing Purchasing Managers’ Index (PMI) jumped from 49.6 in May to 51.5 in June, and thus remained above the 50-threshold that distinguishes expansion from contraction in the sector. The indicator crossed the threshold for the first time in June, following six months of sub-50 readings and reached the highest level since November 2014.

According to Markit, “Russian manufacturers enjoyed one of their most prosperous months for almost two years in June, with expansions recorded in production, new order intakes and workforce numbers.” Furthermore, Markit pointed out that the increase in production reflected higher domestic demand, while foreign demand for Russian manufactured goods continued to be depressed. Markit commented that, “with backlogs also edging closer to stabilization, Russia's manufacturing sector could be set to shift into a higher level of growth over the second half of 2016.”

June’s PMI report is likely to be welcome news for Russian authorities as it gives them hopes that the economy, hit by Western sanctions and low oil prices, has finally bottomed out sooner than initially expected.

In June, the Central Bank revised its growth projections for this year and next. Considering that the price for Urals oil will average USD 38 per barrel in 2016, the Central Bank expects the economy to contract between 0.3% and 0.7%. The 2016 GDP growth forecast was revised up from the Bank’s previous estimate that had the economy contracting between 1.3% and 1.5%. Furthermore, the Bank expects the economy to expand at a rate of between 1.1% and 1.4% in 2017, assuming that Urals oil prices will average USD 40 per barrel. Previously, the Bank had expected the price for Urals Oil to average USD 35 per barrel and had projected economic growth rising to within a range of minus 0.5% and plus 0.5% in 2017. Following the economy’s collapse in 2015, analysts surveyed by FocusEconomics expect the Russian economy to continue contracting in 2016, although at a more moderate pace. FocusEconomics Consensus Forecast panelists project Russia’s GDP to fall 1.1% in 2016, which is up 0.2 percentage points from last month’s forecast. Panelists expect the economy to expand 1.3% in 2017.


Author:, Senior Economist

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Russia PMI Manufacturing June 2016

Note: Markit Manufacturing Purchasing Managers’ Index (PMI). A reading above 50 indicates an expansion in business activity while a value below 50 points to a contraction.
Source: Markit.


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