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Russian Manufacturing PMI in October was up on stronger local demand


The Russian Manufacturing PMI index ticked up further, to 52.9 in October from 52.4 in September, on the back of the 20-month strong performance of both components: new orders (56.2 vs. 54.0 in the previous month) and output (55.3 vs. 53.9). At the same time, a detailed breakdown reveals that the export orders subindex again dived below the no-change mark to 49.6 in October from 50.4 the previous month. The employment component decreased to 50.3 from 51.8 in September, remaining near the 50 mark. The prices sub-indices slowed in October, with input prices edging down to 56.6 from 61.4 in the previous reported period, and output prices sliding to 54.2 vs. 54.8 a month ago.

We believe that October’s reading reflects a modest rebound in manufacturing sector growth, underpinned by a jump in internal demand growth, despite a decline in export orders and almost unchanged employment growth. Meanwhile, softer inflation pressures coincide with the recent weekly CPI reading, which indicated a notable deceleration in prices growth (likely to be a one-off, in our view). We believe that the recent improvement of local demand is unlikely to be sustainable, as cooling lending, a rising saving ratio and the ongoing income growth slowdown (real wage growth stood at 6.3% YoY in August-September vs. 10.5% YoY in 1H12) may drag down the consumption increase.

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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