Page 38 - RusRPTMay20

Despite the reduced demand, inflationary pressures were up ​caused by the supplier shortages as supply chains have also broken down. The devaluation of the ruble by some 15% this year has also put upward pressure on prices as crucial imports have become significantly more expensive. As ​bne IntelliNews r​ eports in its​ ​Russia monthly country report​ machinery and equipment made up 30.2% of Russia’s imports by value in February.
“A depreciation of the ruble pushed imported input prices higher in April,” Markit said. “Unfavourable exchange rates were partially behind the sharp increase in cost burdens during the month, with the pace of inflation accelerating to the fastest since the hike in VAT in January 2019. Nonetheless, firms passed part of the rise in input prices to their clients through a strong increase in output charges.” As the economy came to a standstill new orders fell at an unprecedented pace at the start of the second quarter. Concurrently Russia was hit by the stop-shock across Europe and new export orders contracted at a record rate, reports Markit, with a number of firms stating that clients had cancelled or postponed orders since emergency public health measures were put in place.
The outlook of managers for the rest of the year considerably blackened
in April, a finding that has been bourn out by the sudden drop in Rosstat’s monthly business confidence survey, which dropped from the usual -2 from this season to -7 in April, almost its lowest level in the last three years.
“Although still expecting a rise in production, firms were their least confident since the series began in April 2012. Key concerns for companies were the length of lockdowns and how quickly the economy will recover once emergency measures are lifted,” Markit reports.
Unemployment is expected to rise from the current post-Soviet lows ​of around 4.7% in March to anything between 7% and 10%, according to various estimates – what will actually happen all depends on the strength of the expected rebound and the duration of the stop-shock. Still, as reports coming of wide spread wage reductions, mandatory holidays and sackings clearly the affect on the labour markets is going to be significant.
“In line with a marked drop in client demand, firms cut their workforce numbers at the quickest rate since January 2009, reports Markit. “The decrease in employment was a stark turnaround from the broadly unchanged levels seen in March.” The halt in production meant that factories rapidly began to clear the backlog of orders still on their books. Backlogs of work fell at the strongest pace since December 2008, thereby expanding spare capacity further, according to Markit.
Vendor performance was also hit as they were hit by the double whammy of rapidly falling demand coupled with longer lead times​ to a deterioration in the greatest deterioration in sales seen since data collection began in September 1997, as the supply and distribution chains buckled. Longer lead times stemmed from logistical issues following the outbreak of COVID-19 and supplier shortages.
Siân Jones, Economist at IHS Markit, which compiles the Russia Manufacturing PMI survey, commented: "Already-difficult demand conditions across the Russia manufacturing sector were further exacerbated by factory closures and lockdowns following the escalation of the outbreak of COVID-19.
38​ RUSSIA Country Report​ May 2020 ​ ​www.intellinews.com