Russian Manufacturing PMI Improves to Four-month High in September

Steven Bobson, Europe & Americas Editor
October 01, 2012 /

Survey data signalled an improving business climate for Russian manufacturers in September.

The latest HSBC PMI data compiled by Markit extended the current sequence of gains to 12 months, and marked the best overall performance since May. Growth rates for output, new orders and employment all accelerated, and new export business stabilised having declined the previous month. The latest survey findings also signalled a strengthening of inflationary pressures in the sector.

Alexander Morozov, Chief Economist (Russia and CIS) at HSBC, said: “Growth momentum in Russian manufacturing improved in September, with stronger growth of output, new orders and employment registered by relevant PMI Indexes. New export orders have pleased too resuming their crawly growth. Complementing this benign picture, price pressures have intensified as both input and output prices accelerated their growth markedly in September. Indeed, with stocks of finished goods falling at the fastest rate for many months, companies should have found it natural to respond to stronger demand and rising costs with higher charges for their goods.

“The September HSBC Manufacturing PMI release proves the ability of Russian manufacturing to grow despite global headwinds. The energy-biased structure of Russian exports makes it pretty resilient to weaknesses of international trade. Besides, a large and growing domestic market gives some independent impetus to manufacturing growth.

“Overall, the PMI report provides arguments for the continuation of monetary policy tightening, we think. Yet, fewer work days in September 2012 than a year ago will likely translate into a weak industrial production print for this month masking a stronger underlying growth in manufacturing. Therefore, in the end the authorities may become cautious about tightening policy too fast.”

The survey’s headline figure is the HSBC Purchasing Managers’ Index™ (PMI) – a composite indicator designed to give a single-figure snapshot of operating conditions in the manufacturing economy. The PMI improved to a four-month high of 52.4 in September, up from 51.0 in August and slightly above its historic average of 52.1.

Russian goods production increased in September, continuing the trend observed since August 2009. Moreover, the rate of expansion accelerated to the fastest since April. Output continued to be supported both through increases in new business and the completion of backlogs.

New orders placed with Russian manufacturers rose for the twelfth month in a row in September. The rate of
growth was the strongest in four months, supported by a marginal increase in new export business.

September data signalled a marked fall in backlogs of work at Russian goods producers, in line with the downward trend of the past three years. Moreover, the rate of depletion was the fastest since June 2011.
Employment in the sector rose in September, following little change during the previous two months. Workforce
numbers have expanded eight times in the past 11 months.

Firms also increased the volume of purchasing activity in September but, with the pace of expansion remaining
weaker than that observed for output, the level of inputs held in stock continued to fall. The rate of contraction in pre-production inventories was the fastest since August 2011.

Inflationary pressures built up in the latest survey period. Average input prices rose at the fastest rate since April 2011, driven by food, energy and transport costs. Output price inflation also accelerated, to the strongest since July 2011. That said, the rates of increase in both cases remained below the long-run survey averages.


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