Russian manufacturing sector sees moderate rebound in December

The Russian manufacturing sector saw a moderate rebound and has recorded the third strongest overall growth in 2018. Strong upturns in production and new business underpinned the growth. The seasonally adjusted IHS Markit Russia Manufacturing PMI index dropped to 51.7 from November’s 52.6. The latest headline figure was the third-highest in 2018 and brought to a close the strongest quarterly expansion since the third quarter of 2017.

Output throughout the Russian goods producing sector rose at a strong rate in December, albeit slightly softer than November. Where a rise was reported, panellists attributed this to greater new order volumes.

New business continued to grow at a strong rate in December and at the second-fastest rate since January. Anecdotal evidence stated that greater client demand and the acquisition of new customers drove the latest upturn. Furthermore, new business from abroad increased for the fifth month running and at a rate above the series trend.

Some companies implied that the rise in new export orders was because of greater access to new markets. Further job creation was recorded in December, consistent with a sustained rise in new orders. Although the softest for three months, the upturn in employment reduced pressure on capacity and led to a 16th successive monthly decline in backlogs.

On the price front, manufacturing companies recorded a softer rise in input prices. The rate of cost inflation was marked overall but dropped to a nine-month low. However, panellists linked the rise in cost burdens to higher raw material prices and greater transportation costs. Average output prices rose at a weaker rate in December. The slowest rate of inflation since March was attributed to a weaker rise in input prices and greater competition.

Output expectations throughout the Russian manufacturing sector rebounded in December to the second-highest since May 2013. Optimism was driven by a sustained rise in new business and access to new markets. Finally, purchasing activity rose at a mild rate. The slower rise in input purchasing coincided with a more rapid decline in preproduction inventories in the midst of the use of stocks in production.