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Russian Manufacturing PMI hits four-year low

Staff writer ▼ | December 30, 2013
The downturn in Russia's manufacturing sector gathered pace in the final month of 2013, PMI data from HSBC showed.
Russia factory
Russia factoryThe downturn in Russia's manufacturing sector gathered pace in the final month of 2013, PMI data from HSBC showed.

The overall deterioration in business conditions was the strongest in four years as new order inflows stagnated, weighed down by a further drop in export demand. This led to only a fractional rise in output, and the worst round of job cuts in over four years. The survey's headline figure is the HSBC Purchasing Managers' Index (PMI) – a composite indicator designed to give a single-figure snapshot of operating conditions in the manufacturing economy. It is derived from indicators for new orders, output, employment, suppliers' delivery times and stocks of purchases.

Readings above 50.0 indicate an overall improvement in business conditions, below 50.0 an overall deterioration. The PMI registered below 50.0 for the fifth time in six months in December. Moreover, it fell from 49.4 to 48.8, signalling the sharpest deterioration in business conditions since December 2009.

Russian manufacturing new orders contracted marginally in December, following a four-month sequence of growth. The rate of decline signalled was only marginal, but the respective seasonally adjusted index was still at its lowest mark in 28 months. Weighing on total inflows of new orders was a further drop in new export business.

The current downturn now stretches to four months, and the rate of contraction remained solid despite easing slightly since November. Meanwhile output rose only fractionally in December, and backlogs fell sharply.

With low workloads and a lack of incoming new business, manufacturers in Russia reduced the volume of inputs ordered in December. Moreover, the rate of decline accelerated since November to the fastest since May 2009. Another negative finding from the latest survey was a sharp drop in employment in the manufacturing sector. Workforce numbers have declined 13 times in the past 14 months, and the rate of job shedding in the latest period was the fastest since August 2009.

Linked to the weaker ruble, input prices paid by Russian manufacturers rose at the strongest rate in 15 months in December. That said, the rate of inflation remained weaker than the long-run survey average. Meanwhile, factory gate prices rose at a moderate rate that was unchanged from November's 11-month high.