3/2/16: Russian Services & Composite PMI: Poor Start for 2016

Russian Services PMI for January 2016 came in with a hugely disappointing reading, falling to 47.1 from already poor 47.8 recorded in December. Per Markit: “This fall was driven by a solid contraction in new business levels, leading to another deterioration in backlogs of work. Meanwhile, job shedding persisted throughout the sector as firms turned pessimistic towards their future outlook for activity. Input prices continued to rise at a much quicker pace than average charges.”

On a 3mo average basis, the index is now at 48.2, worse than already poor 49.4 average for the 3 months through October 2015, although, as expected - well above the abysmal 44.7 average for the 3mo period through January 2015. Just how bad the current 3mo average and the latest monthly index reading is? Historical average for Russian services PMI is at 55.0 - full 7.9 points ahead of January reading.

Bad news is that the Services sector contraction has now accelerated (on both monthly basis- for the second consecutive month) and on 3mo basis too.

Again, per Markit: “Operating conditions in the sector remained challenging… Down from 47.8, the latest reading signalled the quickest decline in output for ten months.”

Chart to illustrate the Services sector woes:

Meanwhile, Russia’s Composite Output Index remained in contraction territory in January, posting a reading of 48.4, up on 47.8 in December 2015. The Composite index was helped to the upside by the Manufacturing PMI which was also in a contractionary territory at 49.8, but above the horror show of Services PMI. January marked second consecutive month that both Manufacturing and Services PMIs for Russia were below 50.0. last time that this happened was in December 2014-January 2015 and in February-March 2015 - in other words, at the dire depth of the current crisis.

Note: I covered Russian Manufacturing PMIs in detail here: http://trueeconomics.blogspot.com/2016/02/1216-russian-manufacturing-pmi-january.html.

Per Markit, “the rate at which incoming new orders contracted [for Services providers] was the fastest since March 2015, with anecdotal evidence linking this to a lack of market demand. That said, Russian manufacturers reported a slight expansion in incoming new orders in January, having registered a decline in December.”

Overall, Russia is once again (second month in a row) ranks as the second lowest BRIC performer in terms of Composite PMI reading, ahead of only a complete basket case of Brazil. More on this to come, so stay tuned.

1/2/16: Russian Manufacturing PMI January 2016: Stagnation Looms

Russian Manufacturing PMI rebound in January compared to December slump, rising from 48.7 in December (the lowest reading since August 2015, to 49.8. Still, January reading was nominally below 50.0, signalling second consecutive month of contraction in country manufacturing activity. In statistical significance terms, January reading is basically singling zero growth.

Per Markit, this means that “Russian manufacturing sector edgeed closer to stability during the first month of 2016” with “both output and incoming new orders return to growth territory”. However, overall, “survey data for the first month of 2016 remained disappointing for Russian manufacturers, as the sector stayed in contractionary territory. Although there were marginal increases in volumes of both production and incoming new orders, job shedding was still evident. Meanwhile, average cost burdens increased at a marked pace, while a more moderate rise in output charges was reported”.

On sectoral basis,”production volumes grew at Russian goods producers during January, having contracted in the final month of 2015. Anecdotal evidence suggested the expansion in output was linked to an increase in
incoming new orders. Job cuts were still evident in the manufacturing sector of Russia in January, continuing a trend that began in July 2013. The rate of job shedding accelerated to a four-month high and was solid overall.”

All of the expansion in new orders was contained within domestic economy, “as new export orders contracted. Falling new business from abroad has been reported in every month since September 2013.”

On a 3mo average basis, Manufacturing PMI for 3 months through January 2016 was 49.7 - below 50.0, although an improvement on 49.1 average for 3 months through October 2015, and on 49.4 3-mo average through January 2015. In simple terms, Russian Manufacturing continued to contract in 3 months through January 2016, but the rate of contraction was virtually indistinguishable from zero growth.

As shown above, Russia retained its's position as the second strongest performing economy by Manufacturing PMIs in the BRIC group.

1/12/15: Russian Manufacturing PMI: November

Russian Manufacturing PMI released by Markit remained within near-zero growth territory, posting 50.1 in November, down on 50.2 in October. Overall, some positives and key negatives were:

• Both output and new orders rose at fastest pace in 12 months; 
• Growth conditions in manufacturing remain extremely sluggish; 
• New export orders fell “at sharpest rate in seven months”;
• Workforce continued to contract, as “employment levels have contracted in each of the past 29 survey periods”;
• Most of uplift in production was signed to agricultural sector production rise (Russian grain crop posted second strongest performance at 117 mL tons through early November, after there record 2014 crop);
• Majority of new orders increases took place in domestic markets

So overall, Russian Manufacturing showed repeated signs of weak stabilisation, but virtually no signs of recovery.

3/9/15: Russian Manufacturing, Services & Composite PMIs: August

Russia PMI data for Services, Manufacturing and Composite posted sub-50 performance across all three indicators in August, returning the economy back to where it was around June 2015, and erasing the fragile expectations of stabilisation that were based on July data.

As noted in my analysis of BRICs manufacturing PMIs earlier (link here):

Russia Manufacturing PMI fell to 47.9 from 48.3 in July, marking 9th consecutive month of sub-50 readings and worst performance in the sector since May 2015. August move effectively demolished previous expectations of stabilisation in Manufacturing sector in Russia.

Per Markit release: "Operating conditions in the Russian manufacturing sector continued to deteriorate during August amid reports of a deterioration in the economic environment. Output was little changed, while new orders and employment both fell to the greatest degrees since May. Notably, a depreciation in the Russian rouble against the US dollar led to a sharp and accelerated increase in average input prices by raising the cost of imported goods. …The net effect was a decline in demand and a drop off in levels of incoming new business."

Meanwhile, Services PMI posted a disappointing decline from 51.6 in July to 49.1 in August, pushing the index below 50 mark once again. The index fell to its lowest level for the period covering last 5 months.

Per Markit: "The Russian service sector registered a slight fall in business activity during August as incoming new orders were barely changed and excess resources remained evident. Backlogs of work were again cut sharply, placing further downward pressure on staffing levels… Undermining service sector activity was a general lack of growth in incoming new business. Latest data showed that new work was only marginally higher, with companies bemoaning a lack of funds at clients amid evidence of a challenging economic environment.

With booth Manufacturing and Services down, Composite PMI for Russia fell below 50.0 marker in August, reaching 49.3 against 50.9 in August. This marks the second month in the last 3 months of sub-50 readings and August Composite PMI level is at the lowest levels since April 2015.

SUMMARY: As I noted consistently in the past, any sign of stabilisation in Russian economy coming on foot of disappointing 1H 2015 will require several confirmations before we can call a switch in the growth trend. This confirmation (on foot of July upside performance) did not arrive to-date.

1/4/15: Russian Manufacturing PMI: March 2015

Russian Manufacturing PMI (Markit & HSBC) for March came in with new disappointment: the indicator slipped to 48.1 from 49.7 in February. This marks the second lowest reading in the series since June 2009 (the lowest reading since June 2009 was recorded in January this year at 47.6).

from Markit release: "production and new business both recorded mild declines. Employment also fell, but at a weaker rate with consumer goods producers recording modest growth. There was some positive news on the inflation front, as input and output prices continued to rise, but to much slower degrees than seen at the start of the year".

Overall trend toward deepening contraction in the Manufacturing remains:

Ironically, February improvement in PMI to 49.7 (still below 50.0) means that 3mo average for Q1 2015 is now at 48.5 which is better than 3mo average for Q1 2014 (48.3), if only marginally. This is despite the fact that in March 2014, PMI was reading 48.3 against 48.1 in March 2015.

As reminder, Russian Manufacturing PMIs first slipped below 50 in July 2013 and remained below 50 in 15 months out of the last 21 months.

2/3/15: Russian Manufacturing PMI: February 2015

Russian Manufacturing PMI (based on HSBC/Markit data) improved from 47.6 in January (sharp contraction that is marked by a statistically significant sub-50 reading) to 49.7 in February (also contractionary, but at a much weaker rate and statistically not significantly different fro 50.0).

According to Markit release, "Russian manufacturing business conditions deteriorated only fractionally in February, as stronger domestic demand drove an increase in new work and production rose slightly. The latest HSBC PMI® data compiled by Markit also signalled weaker – but still severe – inflationary pressures during the month, reflecting the ruble’s recovery from record lows. That said, overall growth of new orders was weak as new export business continued to decline sharply, and employment extended a survey-record sequence of decline to 20 months."

This marks third consecutive month of sub-50 readings, with 3mo average through February 2015 standing at 48.7, weaker than 50.8 3mo average through November 2014, but somewhat better than 3mo average of 48.4 recorded for the 3 months through February 2013. So year on year rate of decline in Manufacturing activity slowed down, but conditions remain weak and are still close to weakening.

2/2/15: Russian Manufacturing PMI slips in January

Russian Manufacturing PMI (Markit and HSBC) for January came in at 47.6, below 50.0 (statistically significant sub-50 reading), down from 48.9 in December. This is the second consecutive month of below 50 readings.

3mo MA through January is at 49.4, which is well down on 3mo MA through October 2014 which stands at 50.6, but ahead of 3mo MA through January 2014 which was 47.6.

The trend remains negative and has been reinforced in January.

1/12/2014: Russia Manufacturing PMI: November 2014

HSBC and Markit released Russian Manufacturing PMI for November today. The data surprised to the upside, posting PMI at 51.7 - a relatively strong rise on 50.3 in October and the highest index reading since October 2013 (51.8).

3mo MA for the series is at 50.8 against 3mo average through August at 50.4 and 50.2 3mo average for the period through November 2013.

The series have been above 50.0 marker now for 5 consecutive months and current reading is statistically above 50.0.

Full release here: http://www.markiteconomics.com/Survey/PressRelease.mvc/a2c07d1d99984e63bff821447287ae97

Overall, nice surprise to the upside. Confirming the nascent positive trend as shown in chart above. However, to make any strongly positive calls, we need to see:
1) improved performance in the services sector - current a major downward drag on the composite PMI, and
2) continuity in manufacturing series to the upside through December.

2/8/2014: BRIC Manufacturing Rebound: July 2014

Summary of BRIC Manufacturing PMIs released yesterday:

Not that you'd notice from the mainstream media, but Russia's manufacturing is back above 50.0 in July after 8 consecutive months of below-50 readings.

A comfortable growth range for Russian Manufacturing PMIs should be around 53-55, so the economy is still miles away from a robust recovery. Further concern is that July 2014 reading might be similar to a spike in October 2013 that was followed by renewed contraction.

1/7/2014: Russia Manufacturing PMI: June 2014

Russia's Manufacturing PMI (released by Markit and HSBC, full release here) showed that contraction in Manufacturing moderated to 49.1 in June 2014, compared to 48.9 in May 2014 - a move that is statistically not significant. The index remains below 50.0, although in the range where deviation from 50.0 is also not statistically significant, signalling continued mild contraction/stagnation in Russian manufacturing.

This marks 8th consecutive month of sub-50 readings and over the last 12 months there was only one month with a reading above 50.0 (back in October 2013). While geopolitical crisis in Ukraine is weighing on Russian economy, the decline in performance set on around May-July 2013, well before the instability in Ukraine manifested itself.

3mo MA through June is now at 48.8, which is marginally slower rate of contraction than signalled by the 3mo MA through March (48.3) and is substantially worse than 3mo MA of 50.9 recorded in April-June 2013.