Page 33 - RusRPTJune18

The CBR's board on April 27 resolved to keep the key interest rate unchanged at 7.25% , pausing the monetary easing cycle after the volatility that followed the latest round of US sanctions.
4.2.1 PPI dynamics
4.3 Industrial sectors and trade 4.3.1 Producers PMI
PPI in gasoline segment skyrocket to 13% mom. According to Rosstat, gasoline producer prices surged by 13% mom in April compared to only modest growth during the whole the first quarter of 2018 . Such exceptional dynamics resulted in a considerable increase of the gasoline consumer prices during May. The key factor for gasoline PPI growth is the increase of the RUB denominated oil prices. The CBR does not believe that such rapid gasoline price growth will be pro-inflationary and in our view, it will not affect its monetary policy stance.
The IHS Markit Russia Manufacturing Purchasing Managers (PMI) showed a contraction in activity in May for the first time since July 2016, falling below the 50 no-change market to 49.8 in May, down from 51.3 in April.
The result will disappoint the Kremlin as Russia’s economic recovery have been going better than expected this year, in part to much higher oil prices than expected; the drop below the 50-mark highlights that the recovery remains fragile.
“For the first time since July 2016, PMI data signalled a deterioration in business conditions in the Russian manufacturing sector in May. Although the decline was only fractional, it was driven by falls in employment and stocks of purchases, while May also saw slower growth in output and new orders,” Markit said in its press release. “Despite signs of slower client demand, business confidence remained robust overall.”
The services PMI is due out next week and will likely continue to be strong and so lift the composite PMI, which will remain well above 50. After dipping to an eight-month low in March , IHS Markit s ervices PMI index put in a strong rise in business activity across the Russian service sector in April , Markit reported on May 7.
The manufacturing result comes after a relatively strong first quarter that saw a
slight recovery in industrial output in April . The first-tier data of Russia Rosstat statistics agency showed improvements on the demand side as well , with retail trade increasing by 2.4% year-on-year in April, up from 2% growth seen in March.
Confirming the trend, the Ministry of Economic Development on May 23 estimated that GDP increased by 1.7% year-on-year in April, up from 1.4% in March and February and 1.1% seen in January.
Markit said that the decline across the Russian manufacturing sector was only fractional, but the fragile nature of the recovery was highlighted by this, the first
33 RUSSIA Country Report June 2018 www.intellinews.com