Page 25 - RusRPTAug21

coming year slipped from that seen in February (+19%) and was below the series average (+28%),’ IHS Markit reported.
The decline in business confidence stemmed from a lower net balance of manufacturing firms predicting higher output over the next 12 months, the joint-weakest on record (since January 2008), Markit reports. Service provider forecasts were unchanged from the previous survey period.
Those results were bourn out by the latest PMI results from Markit. The manufacturing PMI contracted mildly in June for the first time this year (49.2), on the back of rapidly rising input costs, while the services PMI continued to expand (56.5) in June, but at a slightly slower rate than in May (57.5). A score of 50 represents no change in the outlook.
The cooling of optimism comes at a time when Russian business has been at its most confident at any time in the last eight years, according to the latest Rosstat survey. However, with producer price index of inflation (PPI) jumping to 35.3% y/y in May – its highest level ever – and consumer price inflation (CPI) surging to 6.5% in June, despite three rate hikes by the Central Bank of Russia (CBR) this year, the inflationary pressure is eating into the feel good mood that has prevailed since the start of this year.
“Where companies noted optimism regarding the outlook for output, this was due to new product development and greater client demand. A number of companies also suggested that investment in new technology and expanded workforce numbers would help boost production and capacity,” Markit reported.
“That said, Russian private sector firms continued to report threats to output growth over the coming year. Factors identified by firms that have the potential to hamper activity growth included ongoing and recently reintroduced COVID-19 restrictions. More extensive measures also raised further concerns regarding the solvency of customers. At the same time, firms highlighted difficulties finding suitable candidates for current vacancies. Some companies also noted that inflationary pressures and supplier delays could weigh on any future expansion in production,” Markit added.
Employment & Investment Plans
Russian private sector firms reported stronger expectations regarding hiring over the coming year. The net balance of companies that anticipated greater workforce numbers was the highest since October 2019. The uptick in optimism was driven by the service sector, as the net balance of manufacturing firms predicting a rise in employment fell to the lowest since January 2009, Markit reports.
Unemployment has been falling since a peak of 6.4% in the last quarter of last year and dropped to 4.9% in June (revised down from the preliminary estimate of 5.1%).
Investment expectations also improved, reports Markit, as the respective net balances of private sector firms anticipating greater capital expenditure and research and development spending increased to the highest for a year. Manufacturers were once again less upbeat than firms in the service sector.
25 RUSSIA Country Report August 2021 www.intellinews.com