Manufacturing Sector PMI Index in Russia Rises Lightly in February

The seasonally adjusted IHS Markit Russia Manufacturing PMI rose from 47.9 at the start of 2020, to 48.2 in February, remaining in contraction, below the 50 no-change mark, IHS Markit, a global business data provider, reported on Monday.

Russia’s manufacturing sector has been struggling for years and what sporadic growth there has been has failed to gather any momentum. And February’s improvement is likely to be undone in March as coronavirus fears hit the global economy, bne Intellinews writes. China’s PMI collapsed to 38 in February – its worst fall in over a decade as workers across the country stay home to avoid infection.

Likewise, Russia’s industrial production in February was weak, posting a mere 0.2% gain year-on-year after a relatively strong 2.1 in December and results of around 3% growth for most of the months in 2019.

The virus has derailed what should have otherwise been a better year for Russia’s goods producers. The most recent business confidence survey, taken in January before the full impact of virus pandemic fears hit, also dramatically improved as the winter came to an end, rising from -6 to -2, according to a Rosstat survey.

However, Rosstat’s result conflicts with the Markit poll of manufactures who were a lot less optimistic.

“Business confidence continued to be weighed down by greater competition and weaker demand. The degree of optimism was among the lowest for over two years, despite firms highlighting hopes of an uptick in new orders and new product launches,” Markit said.

However, consumption is expected to improve this year after real income growth finally turned the corner on the back of increased government spending in the last months of 2019 and rapidly falling inflation.

Russia’s real wage growth in December accelerated by the highest rate in almost two years (6.9% y/y). Real incomes are starting to rise again and analysts anticipate this trend to continue throughout 2020 as the government increases spending. President Vladimir Putin said on several occasions recently that the top priority in 2020 is to increase incomes.

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