Page 46 - RusRPTJul21

The disruptions to the system have been serious and are now feeding through to produce price inflation, which has soared to 35.3% in May – its highest level since the series started in 2005. The Central Bank of Russia (CBR) is also worried about inflation and CBR governor Elvira Nabiullina said this week that that she would definitely hike rates again in July, possibly as much as a full 100bp.
“Input costs were once again driven higher by supplier shortages and unfavorable exchange rate movements in June, according to survey respondents. The rate of cost inflation was among the fastest on record,” Markit says.
“Consequently, manufacturers raised their selling prices at a historically elevated pace, albeit one that was slower than that seen in May. Some firms stated that the softer increase stemmed from higher output charges negatively impacting client demand,” Markit added.
The higher cost burdens have led firms to further deplete their stocks of inputs during June. Pre-production inventories fell at the fastest pace since last October amid a marginal decline in input buying. Stocks of finished goods, however, decreased at a softer rate as some firms were reportedly able to replenish holdings amid lower new sales.
Markit reported that its panelist have sought to pass on higher input prices to customers, which is contributing to the inflationary pressures.
Amongst other contributors to the fall in the manufacturing index headline figure was a renewed decline in new order inflows during June. The decrease in client demand contrasted with a modest expansion in new sales in May, and was the fastest since November 2020.
The downturn in demand conditions was widely linked to reduced purchasing power at customers amid the surging costs.
The downward trend was also reflected in new export orders, which fell at the quickest rate for five months, reports Markit.
In contrast, output continued to expand in June, which was also reflected in the 11.8% growth of industrial production in May. “The rise in production was the sixth in as many months, despite being only marginal overall. The slowdown in output growth was however, attributed to unstable demand conditions and lower new order inflows,” Markit reports.
“Weak client demand led to a reduction in pressure on capacity at the end of the second quarter, with backlogs of work falling sharply. The decline in work-in-hand was the strongest since the depths of the pandemic in May 2020,” Markit says.
46 RUSSIA Country Report July 2021 www.intellinews.com