Russia: Upturn in manufacturing and services softens in February
March 3, 2017
Following an impressive sprint toward the end of last year and beginning of this, Russia’s manufacturers and service providers took a breather in February. The Manufacturing Purchasing Managers’ Index (PMI) produced by IHS Markit fell to 52.5 in February from 54.7 in January. The fact that the PMI declined but remained above the 50-threshold that separates expansion from contraction in the sector indicates that manufacturing activity continued to expand, although at a slower pace.
February’s performance stemmed from slower growth in new orders and manufacturing production. The pace was reported to be the slowest since September 2016. Due to slower activity, Russian goods producers decided to reduce their payrolls in February. In addition, due to the stabilization and gradual strengthening of the ruble, manufacturers faced lower input costs, which enabled them to lower their charges for the first time in 19 months, “with discounts linked in some cases to efforts to stimulate demand,” according to IHS Markit.
Regarding services, businesses also slowed the pace of activity. The Services PMI dropped from 58.4 in January—an eight-and-a-half-year high—to 55.5 in February. According to IHS Markit, the indicator continued to point to another robust increase in the sector in February, supported by a further increase in new business, although the rate of expansion was the weakest in four months. In contrast to manufacturers, service providers increased their staff levels compared to the previous month. Like good producers, businesses in the service sector faced lower costs.
Author: Ricardo Aceves, Senior Economist