Russia’s manufacturing sector returns to growth territory

Russia’s manufacturing sector has returned to growth territory, based on June’s PMI survey data. The seasonally adjusted Markit Russia PMI Index rose to 51.1 in June from May’s 49.6.

The June index came in above the threshold of 50 and was the highest since November 2014. Strong growth in manufacturing production mainly drove the upturn. This was the most rapid rise in 19 months; however, it continues to be slightly softer than the historical average. June witnessed the hiring of additional workers. This was the second consecutive month of hiring.

New order intakes rose at fastest pace in almost two years, driving the output. But the increase in total business was restricted to the domestic market as foreign demand for Russia’s goods eased further. Volume of new export orders has declined in each of the last 34 months. However, the recent contraction was the slowest.

Meanwhile, goods manufacturers in the country continued to record a drop in unfinished business levels in June. But the decline was the weakest since March 2013. The June data hinted at a further contraction of post-production inventories, extending the current sequence of fall to 26th consecutive months. The rate of decline was strong and quickened to the sharpest in five months, noted Markit.

Goods manufacturers in Russia increased their purchasing activity in June at the most rapid pace in three years. But this did not keep the stock of purchases from falling further. According to panellists, the drop was due to a preference to use inventories in production wherever possible. Meanwhile, price pressures in the manufacturing sector rose further in June as output charges and input costs both rose.