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VTB: Russian Manufacturing PMI drops to 52.2

December 4, 2012
The Russian Manufacturing PMI for November came in at 52.2, down from a final reading of 52.9 in October, but still strong (above the critical 50 point mark which separates expansion from contraction). The output index eased to 54.6 (from 55.3 in the previous month), staying above this year’s average. The new orders sub-index moved down a bit to 55.0 (from 56.2) while export orders showed marginal growth at 50.9 (from 49.6).

Inflationary pressures remain at comparatively modest levels, decreasing from October. The output and input prices indices eased for the third straight month to 52.9 (from 54.2 in October) and to 55.8 (from 56.6), respectively. Meanwhile, the employment component declined to 49.8, from 50.3 in October, remaining near the 50 mark.

The headline number shows that activity in the manufacturing sector was only slightly below October’s levels, reflecting softer demand and coinciding with the overall downward trend in supply. It is noticeable that internal demand decelerated while growth in export demand rebounded slightly. However the latter, if it is for real, might be short-lived due to a range of global headwinds. On a positive note, the growth in input and output prices kept following a downwards path (particularly reflecting the cooling economy growth) and supports our view that the CBR has completed its policy tightening circle and is set to take a pause for the next couple of months.

The decline in the employment sub-index, which dragged PMI down in November, is in line with the ongoing deterioration in economic conditions. Hence, we anticipate a further pick-up in the unemployment rate over the coming months.

Maxim Oreshkin, Daria Isakova
VTB Capital analysts