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Manufacturing PMI improved slightly to 52.0 in January

Manufacturing PMI advanced slightly to 52.0 in January from the no-change level in December, exceeding last year’s average. The detailed breakdown reveals a rebound in all major components. New orders jumped from 52.9 to 56.7, a 22-month high, while new export orders returned to positive territory (to 50.2 from the exceptionally low 46.5 in December), output edged up to 53.2 from 50.6 in a month ago. Meanwhile employment improved a little to 47.1, remaining below the ‘nochange’ mark for the third consecutive month. At the same time, the rates for input and output price inflation slowed in January, with a significant change in the former (down to 52.5 from 56.0 in December) and a modest downturn in the latter (down to 51.9 from 52.9).

The latest manufacturing PMI reading reflects a modest rebound in sector growth, mainly coming from improvements in internal and export demand. Most of the sub-indices point to faster growth, but we consider January’s acceleration to be fragile and do not see enough ground for growth to aggressively recover in the coming quarters. Instead, we think than 1H13 will see economic growth bottoming out and then, closer to the year-end, the economy will likely turn around following monetary easing and public infrastructure spending.

On a positive note, growth in input and output prices continued to follow a downward path, supporting our view that the underlying inflation trend has become disinflationary. We suggest that after a one-off pick-up in headline CPI in January- February, we will see a downward trend in headline CPI. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

PMI, Russia

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