Page 47 - RusRPTAug21

quarter, while new export sales declined again (for the sixth in the last seven months).
Meanwhile, cost burdens continued to rise substantially in July, despite the easing rate of cost inflation. Firms noted that higher input prices were due to hikes in supplier costs and unfavourable exchange rate movements, according to IHS Markit's survey.
"Pressure on margins remained evident, as cost burdens rose markedly once again. Although firms passed through higher input prices where possible, the rate of charge inflation eased to a six-month low," Jones commented.
"Weak client demand and sharp increases in costs dampened optimism, which was in turn reflected in a solid drop in employment as pressure on capacity dwindled," he added.
Although the degree of confidence remained upbeat owing to new product development and hopes of greater client demand, it slipped to a nine-month low, according to July's report. In particular, manufacturers continued to signal a reduction in pressure on capacity in July, as backlogs of work fell further.
Still, despite the dive in July, Jones notes that "the Bank of Russia recently noted that the economy had returned to pre-pandemic levels, with our latest forecast expecting industrial production to rise 6.1% on the year in 2021.”
As followed by bne IntelliNews, in 2Q21 GDP grew by 1.5% compared to the same quarter of pre-crisis 2019, thus marking full recovery to pre-COVID levels mostly driven by domestic demand, according to the latest estimates of the Ministry of Economic Development. GDP increased by 4.6% year on year in 1H21. In June 2021 alone, GDP was up by 8.5% y/y, in 2Q21 by 10.1% y/y.
Russia’s seasonally adjusted IHS Markit Russia Services Business Activity Index registered 56.5 in June, down from 57.5 in May, but still well above the 50 no-change mark, as services continue to recover from last year’s annus horribilis.
The services result brings some relief after the soaring producer prices caused the manufacturing PMI to shrink for the first time this year in June. The headline seasonally adjusted manufacturing PMI posted a contraction of 49.2 in June, down from 51.9 in May and below the no-change 50 market, which signals a contraction.
Combined the expansion in services helped keep the IHS Markit Russia Composite PMI Output Index comfortably in the black, posting 55.0 in June, but manufacturing dragged the overall result down from 56.2 in May. The overall upturn was broad-based, but led by a sharp expansion in the service sector.
The manufacturing result has bucked a trend of rapid and extreme expansion of the PMI index in Central Europe were several countries posted all time record high expansions in June.
47 RUSSIA Country Report August 2021 www.intellinews.com