Page 37 - RusRPTSept19

manufacturing highlights the weakness of Russia’s growth this year. The economy is moving out of several years of recession but it has to been able to gather any momentum and services are carrying the can for the limping manufacturing sector.
Russian service sector firms registered a quicker increase in business activity in August. Although only moderate overall, the pace of expansion was the fastest for four months.
Having said that business owners interviewed by Markit remain optimistic about the outlook for the rest of the year, although their confidence in things improving was slipping in August.
The August data continued to signal a deterioration in operating conditions across the Russian manufacturing sector, Markit reports. The overall decline was driven by the fastest contraction in new orders for over four years and partly stemmed from a sharper fall in new orders from abroad, the strongest since September 2016.
Nevertheless, the contraction was relatively mild in absolute terms and manufacturers remain optimistic about the outlook for the rest of the year. The level of optimism was the highest for four months and strong overall. Positive sentiment reportedly stemmed from new product launches and planned investment in new technology.
Supporting the upturn in services was a stronger increase in new business and a renewed rise in new export orders. However, the general squeeze the economy is feeling means that service companies reduced their workforce numbers for the fourth month running and service company owners are less optimistic about the outlook for the rest of the year than manufacturing. The degree of business confidence dipped to the lowest since March as service providers expressed greater uncertainty towards the wider economy. That said, firms were still hopeful of growth, with some attributing positive sentiment to new product development and an uptick in new business.
The PMI result tallies with Rosstat’s business consumer index, which has dramatically improved this year, posting a result of -1 for the last three months, but slipped to -2 in August. Still, business is much more optimistic following several years of pessimism, during the silent crisis years of 2014-2016 when the business confidence index fell to a low of -8 as recently as December 2018.
The mixed demand meant that price pressure is subdued in the service sector and in line with the over all trend in Russia of cooling inflation. consumer price inflation (CPI) in August is 4.7% but that is expected to fall to 3.8-4% by the end of the year, inside the Central Bank of Russia (CBR) target rate of 4%.
The composite PMI increased, thanks to the service sector, at the fastest pace in three months. Nonetheless, the increase was slower than the long- run series average.
Following two successive monthly declines in new business, August data signalled a rise in new orders across the private sector, albeit only a marginal increase.
Commenting on the PMI data, Siân Jones, Economist at IHS Markit said: “The
37 RUSSIA Country Report September 2019 www.intellinews.com