Russian manufacturing decelerates in July, economy likely to grow 1.5 pct in 2019

Russia’s manufacturing fell back into decline in July after displaying signs of rebound, reflecting a lower oil price and generally falling demand conditions throughout the EMEA region and euro area. On a sequential basis, industrial output dropped 0.7 percent in the month – and although this followed a solid 2.3 percent rise in the prior month, output is now back at its level of April, which signifies that the trend is flattening out.

An increase in the oil price in earlier months along with reducing threat of harsh U.S. sanctions had started to restore some business sentiment in Russia: the PMI had started to rise towards the 50 mark. But the renewed slowdown of the global economy and the U.S.-China trade war have started to hamper sentiment again.

“We forecast weak 1.5 percent GDP growth in 2019 -- the risk to this forecast is already to the downside. The data are modestly rouble-negative because were a sustained downturn to ensue, CBR might cut rates by 50bp, rather than 25bp, at either its September or December meeting”, said Commerzbank.