4/7/15: Russia Services and Manufacturing PMIs: June 2015

Manufacturing: 

• "Operating conditions in Russia’s manufacturing sector continued to deteriorate modestly during June as output, new orders and employment all fell."
• "Price levels continued to rise, albeit at historically muted rates, while shortages of working capital and input inventories meant firms continued to meet their orders directly from stock wherever possible."
• Manufacturing PMI posted 48.7 in June, still in contracting mode, but a slight improvement on 47.6 in May. 
• June marked 7th consecutive month of Manufacturing PMIs below 50.0
• 3mo average through June was 48.4 against 3mo average through March at 48.5 and 3mo average through June 2014 at 48.8. In other words, the rate of contraction remained broadly the same in 3mo through June 2015 as in previous 3mo period.

Services:

• Slight fall in service sector business activity during June as activity declined in spite of ongoing growth in new work
• Extra capacity signalled in service sector as backlogs and employment both continue to fall
• Service providers retain some optimism of pickup in activity in coming year
• "Activity levels in Russia’s service sector were down marginally in June as ongoing growth in new business proved insufficiently strong relative to capacity levels. …Capacity was cut in response through to another marked fall in staffing levels."
• Services PMI fell to 49.5 in June from 52.8 in May, reversing two months of above 50.0 readings in April-May.
• 3mo MA through June 2015 was 51.0 against 3mo average through March 2015 at 43.8 - a marked improvement for the 2Q 2015. 3mo average through June 2014 was 47.6, which means that 2Q 2015 saw, on average, positive, but weak growth against sharp contraction in 1Q 2015 and moderate contraction in 2Q 2014.

Composite:

• Markit Russia Composite PMI Index recorded a level of 49.5 in June, down from 51.6 in May and a three-month low. 
• Composite PMI 3mo average through June 2015 was 50.6, well ahead of 45.7 average through 1Q 1015 and 48.3 average for 2Q 2014. Again, in quarterly terms, 2Q 2015 was stronger, signalling growth, compared to contractionary dynamics in 2Q 2014 and 1Q 2015.

Note: most recent trend (downward shift in overall activity across all two sectors) set in around October 2012 and run through February 2015. Since February 2015, we are seeing some improvements in the series, but no new trend, yet.

3/6/15: Russian Services & Composite PMIs: May

Having covered Russian Manufacturing PMI earlier (here), now lets update data for Services PMI and Composite PMI.

In contrast to disappointing Manufacturing PMI, Services PMI for Russia came in at a surprising strong upside, rising to 52.8 in May 2015 from 50.7 in April. This marks the highest reading since December 2013 and the second consecutive month of above 50.0 readings in the series. 3mo average through May 2015 is now at 49.9 as opposed to 3mo average through February 2015 at 43.7 and 3mo average through May 2014 at 46.9.

Composite PMI, pushed up by Services sector reading posted another surprising rise to 51.6 in May, signalling rather solid growth momentum, compared to 50.8 in April 2015. 3mo average for the series is at 49.7 against 3mo average through February 2015 at 45.8 and 3mo average through May 2014 at 47.5.

As chart above illustrates, we now have strong growth in Services sectors driving up overall Composite indicator. This is quite surprising, given April real dynamics (see here).

Overall, PMIs indicate a volatile, trend-less movement toward overall economic stabilisation that require two things to confirm a positive trend: 1) improvement in Manufacturing reading over the next 2-3 months and 2) continued above-50 readings in Services over another 2-3 months. In simple terms, it is too early to call a positive trend in the economy, but Services dynamics are encouraging.

3/12/2014: Russia Services & Composite PMIs: November

Pretty tough news for Russian Services and Composite PMIs for November.

As a reminder, Manufacturing PMI for November posted a nice surprise, rising to 51.7 in November from 50.3 in October. However, as I noted in the analysis of Manufacturing figures here: http://trueeconomics.blogspot.ie/2014/12/1122014-russia-manufacturing-pmi.html the devil was always in the services PMI data.

Services PMI came in significantly to the downside. November Services PMI reading fell to an abysmal 44.5 from already poor 47.4, marking second month of contraction, and a sharpest rate of contraction since May 2009.

3mo MA is now at 47.5, and 3mo MA for the period through August is at 49.9, which means 6 months of continued declines (on average) in the sector activity. In 3mo through November 2013, the index averaged 52.3.

Composite PMI, driven by Services downside, fell off the cliff from 49.1 in October to 47.6 in November, marking an outright statistically significant contraction. 3mo average through November 2014 is at 49.2 against 3mo average through August at 50.8 and 3mo average through November 2013 at 52.2.

All three PMIs taken together show continued strong trend to the downside, a trend that was clearly established in Q4 2012 first on foot of structural weaknesses, further reinforced by sanctions and counter-sanctions, plus now being strongly propelled by the drop in global energy prices. Additional driver to the downside is the global environment that currently strongly disfavours all BRICs (here is my analysis of BRICs Manufacturing PMIs: http://trueeconomics.blogspot.ie/2014/12/2122014-bric-manufacturing-pmis.html and stay tuned for analysis of BRICs composite and services data coming up later this week).

Overall, the weaknesses in Russian economy continue to persist and the downside to the Composite PMI index suggests that we are now likely to see contraction in economic activity in Q4 2014. As I predicted before, official recession will most likely be unavoidable in Q4 2014 - Q1 2015. The question now is at what rate the economy will be contracting.

6/11/2014: Russia PMIs: Signalling a Poor Start to Q4

Russia's PMI indices out for October 2014 signal further deterioration in growth conditions at the start of Q4.

• Manufacturing PMI barely remained above 50.0 line posting a reading of 50.3 in October, down from the already statistically insignificant 50.4 in September. 3mo MA is now at 50.6, still better than 3mo MA through July (49.7) and 3mo MA through October 2013 (50.2), but all of this is down August reading (51.0). The index is trending well below historical average of 51.8. As a reminder, Manufacturing sector has been posting weak PMIs since around March 2013, with sub-50 readings from November 2013 through June 2014.
• Services PMI fell sharply in October to 47.4 (signalling a sharp contraction) from 50.5 in September. 3mo MA through October is now at 49.4, which signals slower decline in output in the sector than 3mo MA through July (48.5), and stands contrasted by the robust expansion in 3mo through October 2013 (51.9). The index is well below the historical average of 55.7.
• Composite PMI has fallen below 50.0 line for the first time after 4 consecutive monthly readings above 50.0. October reading is at 49.1, down from 50.9 in September. 3mo MA is at 50.4 against previous 3mo MA at 49.5 and 52.0 a year ago.

Chart below illustrates:

As sanctions against banks and corporates bite, Russian companies are aggressively deleveraging out of foreign-listed and intermediated debt. This is cutting back investment and lending activities across both Manufacturing and Services sides of the economy. The October figures are not reflective of the aggressive hikes in interest rates passed through by the Central Bank of Russia (+1.5% to 9%), so we can expect even further deterioration in activity in November. It now appears that, as expected, Q4 2014 will post negative growth in the economy.

3/10/2014: Russian Services & Composite PMIs: September 2014

Russia Services and Composite PMIs were released today by Markit/HSBC for September.

I covered relatively poor performance of the Manufacturing PMI here: http://trueeconomics.blogspot.ie/2014/10/1102014-russian-manufacturing-pmi.html and comparatives between BRICs for Manufacturing were discussed here: http://trueeconomics.blogspot.ie/2014/10/2102014-bric-manufacturing-pmis-things.html

On Services PMI side:

• September PMI came in at 50.5 which is basically unchanged on 50.3 in August and signals weak growth (statistically, this reading is not significantly different from 50.0).
• 3mo MA is now at 50.2 (barely above 50.0) although that is an improvement on Q2 2014 reading of 47.6, yet poorer than Q3 2013 reading of 50.7.

On Composite PMI side:

• Composite PMI declined marginally from 51.1 in August to 50.9 in September, still staying ahead of 50.0. Both readings were, however, statistically not significantly different from 50.0, implying weak expansion in output.
• Q3 average is at 51.1, which is a lot better than 48.3 average for Q2 2014 and is ahead of 50.4 average in Q3 2013.

Chart below shows three PMIs together and identifies October-November 2012 are the period of trend shift toward falling PMIs.

Overall, activity remains subdued across all sectors of the Russian economy and growth signals from PMIs suggest that this year growth is likely to be in the range of around 0.4-0.5%.

Comparatives with BRICs are coming up later today, so stay tuned.

3/9/2014: Russian Services & Composite PMIs: August 2014

Having covered Markit/HSBC PMI for Manufacturing for Russia here: http://trueeconomics.blogspot.ie/2014/09/192014-russia-manufacturing-pmi-august.html lets now update data for Services PMI and Composite PMI.

Services side of the economy posted a month of very anaemic growth, registering 50.3 in August after the contraction of 49.7 in July. On the surface, August reading break 5 month streak of PMIs below 50.0, but in reality, 50.3 is weak. So weak, it is statistically indistinguishable from 50.0 as was 49.7 before it and 49.8 in June.

3mo average through August is now at 49.9 - making the above point on weakness. This stands above 3mo average through May which was 46.9. As a reminder, weaknesses in Russian services sectors began well before all the geopolitical mess in the Ukraine set on. Hence, 3mo average through August 2013 was 49.8. Services sectors did bounce back in 2013 in August as they did this time around, but the bounce back is weaker in 2014 than in 2013. The recovery accelerated somewhat through December 2013 and then slumped from January on. It remains to be seen if September heralds some revival in the sector fortunes.

Historical average for the series at 55.8, so we are way below where the average growth is supposed to be, which is, adjusting for structural issues and dynamics is probably around 52-53 mark.

With weaknesses in services and only marginally better manufacturing reading, Composite PMI still under performed in August. August Composite PMI fell slightly to 51.1 from 51.3 in July. Nonetheless, the indicator stayed above 50.0 line for the third consecutive month in a row. 3mo average through August is at 50.8, up on 3mo average through May which was at 47.5. As with Services, 3mo average currently is above 3mo average through same period of 2013 (50.0), but the increase y/y is relatively weak.

Again, the same pattern found in the Services sector trends repeats in the Composite indicator:

• Overall economic weaknesses in the Russian economy were manifesting themselves back in June 2013 through September 2013, with Composite PMI running only slightly ahead of 50.0 mark. 
• Acceleration in growth in October-December gave way to an outright contraction from January on. It is worth noting that the first sight of sanctions against Russia appears around mid-March 2014 by which time the economy has been posting Composite 2mo average PMI readings below 50.0 for 3 months. 
• Sanctions acceleration in May coincided with lowest point in Composite PMI reading, although the low was statistically indistinguishable from all other contractionary readings, save for January. 
• Since May sanctions (round 2) through August (covering also sanctions round 3 in July), Composite PMI managed to return to growth territory. 

The main points, summarised in the chart below are:

1. Russian economy is still running well below capacity
2. Return of PMIs to growth is fragile and weak - this is the first month of all three metrics reading above 50.0 since October 2013
3. We need at least 2 more months of readings above 50 for all three metrics to call a reversal of the downward trend into an upward, and
4. We need to see PMI reading around 52-53 fort Services and Manufacturing to spot any improvement in surplus capacity.

5/8/2014: Russia: Manufacturing, Services & Composite PMIs: July 2014

Russia Services and Composite PMIs are out for July (released by Markit and HSBC). Here are the top-level numbers:

• Recall that Manufacturing PMI cam in at 51.0 in July, up on 49.1 in June and 49.2 in July 2013. This marks the first month of above 50.0 reading. Manufacturing went below 50.0 mark in July 2013, so this means we had 11 months of contracting output from July 2013 through June 2014 and one month of expansion at 51.8 back in October 2013. This is evidence of a structural slowdown in the economy, compounded by the Ukrainian crisis, although the effects of the crisis are not the only explanatory factor here.
• Services PMI came in at 49.7 - marginally below 50.0 and slightly lower than 49.8 reading in June 2014. In July 2013 the index stood at 48.7. All in, we now have 5 consecutive months of readings below 50.0 with marked slowdown in growth starting around July 2013 and accelerating from March 2014 through June 2014. 3mo MA is now at 48.5 which is nearly identical to 48.4 3mo MA through April 2014. 3mo MA for 3 months through July 2013 was at 49.6. Again, structural slowdown is evident in the series and again, the slowdown is being exacerbated by the Ukrainian crisis.
• Composite PMI came in at 51.3, marking second consecutive month of above 50.0 readings (although June reading of 50.1 was extremely weak). 3mo MA through July 2014 is at 49.5 and 3mo MA through April 2014 was 48.5, while 3mo MA through July 2013 was at 49.9. Exactly the same story as with the above sectoral indices: manifestation of a slowdown in July 2013, followed by continued weakness through February 2014 and deepening in slowdown from March 2014 through May-June 2014.

Chart to illustrate:

All PMIs remain in 'troubled waters' per trend - it will take at least 3 months to reestablish any upward trend and there is significant risk that fragile July improvements can be reversed in months ahead. The Ukrainian crisis is now starting to bite - gradually ramping up downward pressure on the economy.

2/7/2014: Russia Services & Composite PMI: June 2014

Russia Services PMI (Markit & HSBC) is out today for June 2014, posting a reading of 49.8 - virtually indistinguishable from zero growth. 3moMA is now at 47.6 against previous 3moMA at 49.6. In April-June 2013, 3mo MA was 51.1.

June marked the fourth consecutive month of Services PMI below 50.0 and the index has been posting slowdown in the economy since October 2012, with first negative growth signals coming through in Summer 2013.

With improved manufacturing reading (see earlier post here), the Composite PMI for the Russian economy strengthened to 50.1 in June from 47.1 in May. May 2014 marked the lowest reading in the index since May 2009, so not surprisingly, activity showed a slight bounce back. At current levels, however, the economy is not showing signs of recovery.

3mo MA as of June is at 48.3 and 3mo MA for the previous 3 months is at 49.2. Both contrast against the 3mo MA through June 2013 at 51.2/

Again, the slowdown in activity is marked from October 2012.