The decline in manufacturing PMI is evidence of the Russian economy’s weak dynamics. Importantly, that weakness was driven by the internal demand situation, while export orders recovered to their highest level since May 2012. The dip in new orders (from 53.7 to 49.9) looks strong, but we prefer not to pay too much attention to the size of the move as it was driven by the sharp plunge at intermediate goods producers. Both the consumer and investment goods sectors, on the other hand, showed an improvement. Such dynamics imply that we are likely to see this indicator recover in the coming months. Nevertheless, the internal demand situation remains weak, and this is pushing companies to shed staff: the weak employment component of the index indicates that labour market conditions continued to deteriorate in 3Q13.
The recent report once again highlights that the CBR is doing too little, too late in terms of monetary policy easing and that regulators need to intensify their easing attempts in order to prevent any further cyclical weakness of internal demand.