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December Purchasing Managers’ Index data from VTB Bank Europe underlined the stark reversal in business conditions in the Russian manufacturing sector during the final quarter of 2008. The latest findings signposted a steeper rate of contraction than that seen during the financial crisis of a decade ago, with both output and new orders declining much more sharply than in any other period covered since the inception of the survey in September 1997. Meanwhile, deflationary forces were in evidence for the second successive month, with both input and output prices declining at series-record rates.
The seasonally adjusted Russian Manufacturing PMI remained below the no-change mark of 50.0 for the fifth successive month in December, indicating a sustained overall deterioration in business conditions. The PMI stood at 33.8, easily its lowest level ever. The headline index has plummeted 16 points over the course of the fourth quarter.
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.
Underpinning the marked deterioration in overall business conditions in December was a rapid contraction of incoming new orders to manufacturers. New business has declined throughout Q4, and the latest anecdotal evidence showed widespread financing difficulties at customers amid worsening domestic and export demand. Both total new work and new orders from abroad fell at series-record rates in December.
Russian manufacturing production fell at the fastest rate in the survey history in December, extending the current period of contraction to three months. More than half of the survey panel reported lower output compared to one month previously, with some firms reporting production stoppages and the implementation of unpaid holidays for staff.
Commenting on the survey, Dmitri Fedotkin, economist at VTB Bank Europe Research, reported: “The Russian Manufacturing PMI plummeted to a record low of 33.8 in December, indicating a marked contraction in the sector over the month. Eight of survey’s sub-indices registered historic lows – including output, new orders and purchases – suggesting a steeper rate of contraction than that seen during the financial crisis of a decade ago. The sharp deterioration in business conditions has also been reflected in a substantial weakening input and output prices, which declined at series-record rates.”