Russian manufacturing index improves along with stronger demand
In February, manufacturing in Russia showed the strongest growth in almost two years, reads IHS Markit’s data. Although businesses are still facing difficulties, the country’s economy is on the path to a return to normality, believe the analysts.
Russia’s Manufacturing PMI showed last month the strongest improvement in operating conditions since April 2019, reports bneIntelliNews. The headline seasonally adjusted index calculated by IHS Markit totalled 51,5 in February, up from 50,9 in January. “The overall upturn was supported by quicker expansion in output and new orders amid stronger client demand. Exports, however, continued to fall due to challenging external demand conditions,” said the company in a note.
A fast rise in goods production was largely linked to stronger demand conditions, notes IHS Markit adding that new order inflows picked up and rose at the fastest pace since August 2020. At the same time, new export business continued to fall in February. Supply chain pressure worsened significantly last month resulting in a higher rate of input cost inflation, which was partially passed on to clients through the fastest increase in charges for six years. Manufacturers had to use their inventories in order to supplement production. Stocks of finished goods fell at the quickest rate for three months, while input buying increased for the first time since August 2020, as firms sought to meet greater production requirements.
Increased cost burdens contributed to rising inflation, which climbed well above the Central Bank’s 4% target rate to 5,2% in January. According to head of the bank Elvira Nabiullina, further growth-inducing rate cuts are unlikely in the meantime.
The manufacturing index was buoyed by a significant rise in employment. In February, the rate of job creation quickened and became the fastest since December 2018. Business confidence among Russian manufacturing firms also remained upbeat in February. The level of positive sentiment improved to its strongest since January 2020, which resonates with the results of a recent business confidence survey by Russia’s Federal State Statistics Service.
Russia is emerging from the COVID-19 pandemic, although its economy was less damaged by last year’s multiple shocks compared to many other countries. GDP contraction amounted only to 3,9% despite early predictions of a 6% fall. According to bneIntelliNews, the country is well ahead of the rest of the world on the path to a return to normality. Nonetheless, businesses are still facing difficulties, and growth is not expected to return until the second quarter of 2021.