Russian manufacturing business climate improves only marginally in May - HSBC
MOSCOW. June 1 (Interfax) - The Russian manufacturing business climate improved only marginally in May, HSBC said in a research note.
Survey data compiled by Markit signalled a near-stagnation of growth in May and a sharp easing in cost inflationary pressure. Output growth slowed to a modest pace as new orders were broadly flat over the month, while stocks of finished goods rose as sales disappointed.
The headline figure from the survey is the seasonally adjusted HSBC Russia Manufacturing PMI, a composite index designed to track overall business conditions. Any figure greater than 50.0 signals improvement, below 50.0 contraction. The PMI dropped to 50.7 in May, only just above neutrality. It has now fallen by 4.9 points from March's fifty-five month high of 55.6, the largest sustained decline recorded since the financial crisis of late-2008.
Latest data signalled that new order intakes were fractionally lower in May than one month earlier. Domestic demand faltered, while new export orders were largely unchanged on the month. The overall stagnation in new orders brought to an end a sequence of continuous expansion that stretched back to April 2010.
Production growth was maintained for the twenty-second month running in May, but at a reduced rate. The pace of expansion has slowed continuously since hitting a near three-year high in February, with the latest growth the weakest since December 2009. The muted trend in market conditions in the manufacturing sector was underlined by the steepest drop in backlogs of work in six months, and a rise in stocks of finished goods as sales disappointed.
Inflationary pressures eased in May to the greatest extent seen since the onset of the global financial crisis, reflecting the recent falls in commodity prices. Input price inflation slowed for the fourth successive month from January's recent high, and was the weakest since July 2009.
Russian manufacturers increased their prices charged for the twenty-third successive month in May. The rate of inflation slowed, however, to the weakest since last July.
A bright point from the latest survey was a further increase in manufacturing employment. The current period of jobs growth now stretches to eight months.
"Russian manufacturing has almost lost growth momentum. This must reflect a decline in domestic demand, which has led to stocks accumulation for the first time since the 2008 economic crisis. In essence, the PMI report predicts negative surprises from industrial production data for May, and probably beyond," said Alexander Morozov, Chief Economist (Russia and CIS) at HSBC.
"Yet, as opposed to 2008, the downside appears limited this time. New export orders (that have some forward looking power) have not yet declined, rising fractionally since April, while companies continue to create jobs. Provided that export demand is maintained in the coming months, manufacturing appears switching to a crawling growth trend of 2-3% and waiting for new impetus for growth, such as improvements in business climate, political and policy certainty, etc. These growth factors are unlikely to emerge until 2012," Morozov said.
"PMI price indexes point to easing inflationary pressures in manufacturing to below their long-run averages, which is a positive development. Combined with a marked moderation of output growth, the situation in manufacturing seems to justify the dovish policy stance. However, in our opinion, monetary policy cannot and should not be a substitute for structural and institutional weaknesses," he said.