Russian manufacturing deteriorates marginally in Sept, PMI climbs to 49.1 - Markit
MOSCOW. Oct 1 (Interfax) - Russia's manufacturing sector recorded only a marginal deterioration in operating conditions during September as output and new orders both recorded negligible growth, Markit research shows.
However, excess capacity remained prevalent, leading to further job cuts, while price pressures continued to intensify due to a lower value of the ruble against other major international currencies, Markit said in a press release.
The seasonally adjusted Markit Russia Purchasing Managers' Index (PMI) - a composite indicator designed to measure the performance of the manufacturing economy - remained below the 50.0-no change mark in September, extending the current run of contraction to 10 months. However, rising to 49.1, from August's 47.9, the index signalled only a marginal deterioration in operating conditions that was the slowest recorded by the survey since February.
"Contributing to the rise in the PMI in September were improved trends in output and new orders, following a period of contraction. In particular, the intermediate goods sector performed well, recording rises in both output and new work," according to the press release.
"There were reports from the survey panel that domestic demand had firmed over the month and was a key support to production and order books. Some manufacturers commented that the economy was adapting to adverse dollar and euro exchange rates, with import substitution amongst local clients leading to greater demand for domestically produced goods."
"International demand, in contrast, continued to deteriorate, as highlighted by a fall in new export orders for a twenty-fifth successive month. The rate of contraction was again solid, but nonetheless the slowest since June."
"Exchange rate factors were also keenly felt by Russian manufacturers in terms of input costs during September. A weak ruble was by far the most dominant reason behind the sharpest rise in input costs since February. Manufacturers responded by increasing their own charges to the greatest degree in half a year."
"The recent underlying softness in production and new orders led Russian manufacturers to make further cuts to their staffing levels in September. Jobs have been lost in the sector continuously for more than two years, and the latest fall was at a pace unchanged on August's three-month peak. Excess capacity remained a factor behind job losses as highlighted by another sharp fall in backlogs of work."
"Destocking remained prevalent in the sector in September, with both pre- and post-production inventories continuing to be cut markedly. Purchasing activity, meanwhile, fell again, but at the least marked pace in the current nine-month period of decline."
"The Russian manufacturing sector, which has experienced a challenging 2015 to date, showed some signs of stabilisation in September with both output and new orders registering broadly no change since August," said Paul Smith, Senior Economist at Markit, which compiles the survey.
"Looking at panellist reports, it seems that domestic demand is becoming an important prop to the sector, with comments from firms suggestive of ongoing import substitution effects within Russia as the ruble remains weak relative to major international currencies."
"The corollary to this is an ongoing surge in the price of inputs sourced from global markets. Cost pressures are therefore mounting, forcing firms to protect margins wherever possible via increases in their own charges," Smith said.
