Russia’s manufacturing PMI back in growth territory, expands to 51.6 in October

Russia’s manufacturing PMI back in growth territory, expands to 51.6 in October
October PMI data signalled a renewed improvement in operating conditions across the Russian manufacturing sector and was the strongest since May / bne IntelliNews
By bne IntelliNews November 1, 2021

The headline seasonally adjusted IHS Markit Russia Manufacturing PMI registered 51.6 in October, up from 49.8 in September, and signalled the first improvement in the health of the Russian manufacturing sector for five months.

“October PMI data signalled a renewed improvement in operating conditions across the Russian manufacturing sector. The overall rate of growth was the strongest since May, with faster expansions in output and new orders supporting the upturn. At the same time, employment expanded for the first time in five months amid greater production requirements,” Markit said in a press release.

Supply-chain disruption continued to constrain output, as vendor performance deteriorated to the greatest extent since April 2020, according to Markit.

On the price front, the pace of cost inflation eased to its softest since September 2020 and was much slower than the marked rates seen earlier in 2021. Selling prices continued to rise at a sharp pace.

Inflation remains elevated, accelerating to a fresh five-year high of 7.4% year on year in September and, while this was mainly driven by a sharp increase in food inflation, the central bank continued its tightening cycle with a 75bp hike the same month. The outturn was up from 6.7% y/y in August and took the headline rate to its highest level since July 2016. Prices rose by a chunky 0.6% in month-on-month terms, which is much stronger than seasonal norms.

Although the manufacturing PMI was only a marginal upturn, the rate of growth indicated was faster than the long-run series average, which spans over 24 years of data collection, says Markit.

“Contributing to the overall upturn was a faster rise in production at Russian goods producers at the start of the final quarter of the year. The rate of output growth was only marginal, but the fastest since May amid reports of greater customer demand and increased inflows of new orders,” Markit said.

New sales at manufacturers increased at a slightly quicker pace in October, according to panellists. Greater demand from new and existing clients supported the rise in orders. The marginal upturn in total sales contrasted with a sharp decline in new export orders. The rate of contraction quickened and was faster than the long-run series average.

Employment returned to expansionary territory, thereby ending a four-month sequence of job shedding. The rate of job creation was only fractional and mostly linked to an uptick in new order inflows.

According to RosStat statistics, unemployment in Russia decreased to 4.4% in August, down from 4.5% in July, and reached its lowest level since August 2019, RIA reported.

In line with raw material shortages and delivery delays, input prices rose markedly in October. Manufacturers suggested that greater supplier and energy costs drove inflation, despite the pace of increase easing to its slowest since September 2020. Companies continued to pass on costs to their clients, and the rate of charge inflation quickened since the previous month.

At the same time, goods producers signalled another monthly decline in backlogs of work in October. The fall in work-in-hand was solid overall, but eased to its slowest since February as demand for goods picked up.

“Production capacity was again hampered by supply-chain disruption, as suppliers' delivery times lengthened markedly,” Markit said. “The extent to which delays were extended was the greatest since the initial pandemic outbreak in April 2020. Firms often stated that longer lead times were due to supplier shortages and extensive transportation delays.”