Russia manufacturing PMI rises 1.9 points to 52.1

The April survey of Russian purchasing managers from VTB Capital showed tentative signs of a strengthening manufacturing sector recovery. The overall improvement in business conditions was the strongest in nearly two years, driven by higher new orders, rising output and a resumption of employment growth. Meanwhile, inflationary pressure on firms’ input prices was at its highest since July 2008.

The headline figure from the survey is the seasonally adjusted Russian Manufacturing Purchasing Managers’ Index (PMI), a composite indicator designed to track overall business conditions. Any figure greater than 50.0 signals improvement. The PMI rose to 52.1, from 50.2 in March. The latest figure was the highest since May 2008, and was in line with the historic survey average.

Four of the five components of the PMI exerted positive influences in April. The largest contributions to the 1.9-point rise in the headline index were from new orders, employment and output respectively.

The Russian Manufacturing PMI is derived from a monthly survey of 300 purchasing executives in Russian manufacturing companies which has been conducted since September 1997. Readings above 50.0 signal an increase on the previous month while readings below 50.0 signal a contraction.

Output and demand
Having fallen slightly in March, the volume of new orders received by Russian manufacturers increased in April. The rate of growth was weaker than the survey’s long-run trend, but greater than the average posted since last July (when new business rose for the first time since September 2008). The latest data showed that exports were a key source of new order growth, registering the fastest increase in over two years and a rate of expansion that was above the long-run survey trend.

The resumption of new order growth in April contributed to a faster rise in production. Manufacturing output in Russia has increased for the past nine months, and the latest expansion was the strongest since September 2009.

Commenting on the survey, Dmitri Fedotkin, economist at VTB Capital, reported: “In April, the Russian Manufacturing PMI rose to 52.1 from 50.2 in March, its highest level since May 2008. The headline number was supported by improvements in the output (53.9), new orders (52.6) and new export orders (53.0) sub-indices. Most encouragingly, however, the employment index rose to 51.2, pointing to the first monthly rise in employment since March 2008. At the same time, concerns were raised by the significant intensification in price pressures, with the input prices index rising to 67.0 and output prices index rising to 57.1, the highest since August 2008. Producers were able to pass the rising prices in metals, energy, oil products and shipping charges on to end-customers.”