Soft underlying demand for manufactured goods remained the primary factor behind worsening operating conditions during the month. Latest data showed that total new orders fell to the greatest degree in six years, with the fall centred in the main on the investment goods category.
A similarly marked reduction in foreign business was recorded during May, although the rate of contraction eased to the lowest since January. Companies commented on a lack of demand from abroad and that, in some instances, clients were struggling to raise necessary finance. A reduction in new orders weighed on production during May, with latest data showing a marginal contraction in output. As was the case with new work, the decline in production broadly emanated from the investment goods category.
Providers of consumer and intermediate goods both registered growth of output compared to the previous survey period. With new work continuing to fall, business resource was again utilised to lower backlogs of work. May’s survey showed the sharpest reduction in unfinished business for three months. Amid signs of some excess capacity, employment levels were lowered over the month. Moreover, the rate of contraction was the sharpest recorded since January. Latest price data showed that manufacturers benefited to some degree via the recent stabilisation of the rouble against major global currencies such as the US dollar and the euro.
Although input prices continued to rise, reflective of input shortages at vendors, the degree of inflation was the weakest for 27 months. Average output charges also increased at a slower rate, with inflation marginal and the weakest for two years. Finally, lower production requirements led Russian manufacturers to reduce their purchasing activity during May, and also cut their holdings of both pre- and postproduction inventories compared to April.
Comment Commenting on the Russia Manufacturing PMI survey, Paul Smith, Senior Economist at Markit, said: “The stuttering nature of Russia’s manufacturing sector continued in May, with a rather disappointing set of survey data. Output, new orders and employment were all down since the previous survey. “However, the contraction remains primarily centred on the investment goods sector, while the ongoing trend towards price level stabilisation suggests the macroeconomic environment is showing some sign of improvement. This could, in time, help the manufacturing economy regain some lost ground over the coming months.”
