Russia shows manufacturing PMI rebound in June

Russia’s manufacturing PMI bounced back at the end of the second quarter, reports bne IntelliNews citing IHS Markit. The indicator amounted to 49,4 in June, which is just below the 50 no-change mark. When Russia’s economy came to a standstill in April due to the coronavirus epidemic-related lockdown, the country’s manufacturing PMI plunged to 31,1. In May, it increased to 36,2, which was still very deep contraction. Although June’s result still means a slight decrease in absolute terms, it is encouraging as a forward-looking indicator. “The latest figure signalled only a fractional decline in manufacturing sector performance,” said IHS Markit naming it the slowest decrease since May 2019.

Output and new orders have returned to growth in June, as lockdown measures were weakened at the beginning of the month. However, an increase in client demand was only fractional due to gradual resumption of operations, according to IHS Markit. Business confidence also picked up amid hopes of greater client demand, although the majority of businesses consider 2020 to be much worse than 2019.

The collapse in demand caused an increase in unemployment in April-May, which slowed in June, as the market stabilised. However, the number of registered unemployed citizens has risen 3.5-fold since 1 April, according to Prime Minister Mikhail Mishustin. The unemployment rate reached 6,1%, up from around 4,4%-4,6% in recent years. “Despite growth in new orders, manufacturers continued to cut workforce numbers at the end of the second quarter amid signs of spare capacity and historically muted demand. Companies highlighted that redundancies and the non-replacement of employees were behind the solid fall,” IHS Markit said.

The news concerning inflation, which has been another concern, is a lot better. Although inflationary pressures spiked following the ruble’s devaluation during the worst of the crisis months, the collapse in demand and the fall in retail sales turnover helped to offset that effect. According to the latest data from the Russian Federal State Statistics Service, Russia’s consumer price inflation decelerated to 0,3% month on month in May from 0,8% in April, while annual inflation totalled 3%. The Central Bank’s target rate for 2020 amounts to 4%. As a result, the regulator started an aggressive monetary easing cycle that resulted in a 100-basis-point rate cut in June to an all-time low rate of 4,5%. Price pressures softened, as bottlenecks in supply chains were loosened and supplier stocks were rebuilt, confirms IHS Markit.

As for the services PMI, it crashed to an 18-year low of 12,2 in April, as restaurants, hairdressers and other services closed. In the following month, the figure bounced back to 36,2.