Page 30 - RusRPTSept20

August from the mild contraction of 48.4 in July and completing the recovery from the index’s total collapse in the second quarter due to the coronacrisis.
The manufacturing index crashed to an all time low of 31.1 in April as the impact of the lockdown of the Russian economy due to the epidemic took hold, according to IHS Markit that produces the index.
The return to manufacturing expansion – an result above the 50 no-change mark represents growth – is the first gain in over a year and the last of the three indicators to return to the black. Russia’s services PMI bounced back to 58.5 in July, which pulled up the composite index to 56.8 in the same month, despite the mild contraction in manufacturing.
The recovery in the manufacturing PMI is not yet reflected in the industrial production index, which was down by 8% in July, but here too the rates of contraction is slowing from -9.4% in June and -9.6% in May. Bank of Finland Institute for Economies in Transition (BOFIT) reports that in some sectors – most notably agriculture – production has already recovered and is now above its pre-crisis norms, however, retail sales have fallen in all of Russia’s regions, except Chukotka.
Manufacturing growth expansion was the first since April 2019 amid a faster upturn in output and a renewed rise in new orders, reports Markit. As a result, employment fell at the slowest pace for a year, as the rate of contraction in backlogs of work also softened. Firms remained optimistic in August, despite the degree of confidence moderating slightly.
Meanwhile, higher supplier prices pushed input costs up midway through the third quarter, with firms only able to partially pass greater cost burdens on to clients through increased charges.
“The upturn was solid overall and the sharpest since March 2019. Some companies stated that an uptick in customer demand had driven the rise in output,” Markit said. “Anecdotal evidence attributed sales growth to new client acquisitions and greater customer demand. Although only slight, the expansion in new business was the fastest since April 2019. Meanwhile, new export orders fell only marginally, and at the slowest pace since May 2019. Panellists continued to state that foreign client demand was historically weak.”
The slowdown has hit employment with Russia’s unemployment rate rising some 2pp in recent months to 6.3% in July – its highest level in almost a decade. Unemployment was last over 6% in 2011.
The workforce numbers were reduced further in August, albeit at the slowest pace since March 2020, says Markit. Companies continued to report an increase in redundancies amid challenging demand conditions. At the same time, backlogs of work also contracted at a softer pace.
Business confidence dipped slightly in August, but the degree of optimism remained solid. Firms linked positive sentiment to hopes of an uptick in client demand and an economic recovery.
The improving business confidence is mirrored in the Rosstat results, which also recorded a recovery in business confidence to -4.7 from a nadir of -9 in May. While the Rosstat business confidence index is still running well below the -2 it usually registers in the summer months, it remains depressed. And
30 RUSSIA Country Report September 2020 www.intellinews.com