Data just released today shows the manufacturing sector in Russia has contracted for the first time since August of 2011. The HSBC Purchasing Manager Index came in at 49.2 for July, the lowest point since 2009. While orders for Russian goods outside of the country remained robust, domestic orders declined severely. The news comes amongst apparent slowing GDP growth and the country’s largest banks recently being downgraded.
“These results appear negatively surprising after quite robust PMI survey results in the preceding month. Against such a sad backdrop, the improvement of New Export Orders to a 14-month high was the only bright spot in the survey. This is what makes the current situation positively different from those seen in the past, in 2008 and 1998: External demand is favorable for the resumption of growth this time,” said Alexander Morozov, Chief Economist for Russia and CIS at HSBC.
Looking at the recovery perspectives, Morozov said a rich harvest this year could boost the food industry. Coupled with easing inflation this should provide for income growth, better private consumption and increased output in related industries.
“That said, other Russian industries still appear vulnerable in the current environment, and the sustainability of export demand is not guaranteed, with signs of further growth moderation in China,”Morozov said.
Via Floating Path