The Russian Manufacturing PMI for November reverted to 49.4 (exactly the same as September) after a short-lived upturn to 51.8 in October. The new orders sub-index decreased to 50.6, mainly owing to weakness in local demand, as the new exports orders index edged up moderately to 46.6 (although it remained below the 50-mark for the third month in a row). Also, the output index returned close to September’s level with a print of 50.9 (vs. this year’s high of 54.9 in October).
Inflationary pressure indicators increased a bit in November but remained historically muted: the input prices index was up to 56.9 vs. 54.0 a month ago, while output prices were at 52.7 vs. 51.1. The employment component eased to 47.1, from 48.6 a month ago, and has remained below the 50 mark for over a year (with the exception of June 2013).
The headline number suggests that November brought a downward correction in manufacturing activity after a rather sharp advance in the previous month, implying growth fragility. We believe that the underlying momentum in the Russian economy is still poor and retain our view that temporary factors such as the base effect in agriculture, state investments and the Olympics might only ensure a technical rebound.
Weaker overall demand (both local and external) has continued to weigh on employment in the manufacturing sector: the respective sub-index has been persistently contracting during more than a year.
Cost pressures bounced somewhat, particularly on the back of food inflation, but remained subdued in historical terms. This coincides with our view that headline CPI was spurred by stubborn food inflation in November and that its annual growth was 6.3% YoY at the end of last month.