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Sharper fall in output weighs on manufacturing in Russia

Christian Fernsby ▼ | September 3, 2019
Spain's manufacturing sector continued to contract during August, undermined by the sharpest fall in output since May 2013 and a further reduction in new orders.
Manufacturing in Russia
Europe   Sharper fall in output weighs on manufacturing in Russia
With excess capacity evident, firms continued to make cuts to staffing levels and inventories.

Topics: Russia manufacturing

Confidence about the year ahead improved, but remained at a historically subdued level.

August's IHS Markit Spain Manufacturing PMI – a composite single-figure indicator of manufacturing performance – came in at 48.8.

Whilst a slight improvement on July's 48.2, the index has now posted below the 50.0 no-change mark for three months in succession to signal a sustained period of contraction for the sector heading into the final months of 2019.

The key depressor of the PMI in August was a further reduction in production.

According to the latest data, output was cut for a third successive month and to the greatest degree in nearly six-and-a-half years.

Falling output in part was driven by an increased desire amongst manufacturers to use existing inventories.

Stocks of finished goods were cut at a rate only slightly slower than July's nine-and-a-half year record, which helped firms to keep on top of workloads.

Indeed, backlogs of work were reduced in August to an extent that was only slightly slower than July's 75-month record.

Further weighing on manufacturers was another drop in levels of new work.

August's survey showed a fourth successive monthly reduction in new orders received.

Amid reports of apathy in European markets, new export orders also fell (the third contraction in a row).

However, signs of stabilisation compared to the previous month were apparent with both overall and export orders falling only slightly.

Given the ongoing softness in production and inflows of new orders, manufacturers on average chose to reduce staffing levels at their plants.

August marked the fourth month in succession that a reduction in staffing levels has been recorded, although the latest cut was the weakest since May.

Worries about future output added to the downward pressure on employment.

Although on average firms are expecting production to rise from present levels in 12 months' time, sentiment remained amongst the weakest recorded by the survey in the past six-and-a-half years.

Worries over a continuation of the recent soft demand trend and concerns of a deepening of the current global downturn were reported to have weighed on confidence.

Meanwhile, prices showed little variability during August.

Input costs were down only slightly, whilst there was no change in output charges.

Firms commented that the prices of some oil-related goods were down since July, but the short-supply of other items had prevented a larger fall in overall input costs.

Indeed, this was reflected by delivery times data which showed the greatest deterioration in vendor performance of 2019 so far.

Firms widely bemoaned the lack of stock at vendors, which was reported to have led to delivery delays.

Moreover, longer times occurred in spite of a notable reduction in purchasing activity during August as firms utilised existing inventories in production wherever possible.

Stocks of inputs were cut in August to the greatest degree since the end of 2013.