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Russian economic activity picks up as coronavirus-related restrictions ease

Russian economic activity picks up as coronavirus-related restrictions ease
Russia’s manufacturing and services sectors bounced back in the second quarter, following a decline in April due to the Covid-19 pandemic and ensuing lockdown.

According to IHS Markit, the official manufacturing purchasing managers’ index (PMI) for the country’s manufacturing sector rose to 49.4 in June, up from 36.2 in May. A reading above 50 reflects growth in factory output, while a reading below signals contraction. In April, the PMI plunged to 31.1 amid the coronavirus shutdown and falling oil prices.

“The latest figure signaled only a fractional decline in manufacturing sector performance,” said the statistics agency, noting that it was the slowest decrease since May 2019. 

Output and new orders have also resumed growth in June, as lockdown measures were eased at the beginning of the month. However, an increase in client demand was only fractional due to the gradual resumption of operations, according to IHS Markit.

The services PMI, which dropped to an 18-year low of 12.2 in April as restaurants and other services closed, bounced back to 36.2 the following month.

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Business confidence is picking up amid hopes of greater client demand. Data showed that the collapse in demand caused an increase in unemployment in April and May, which slowed in June as the market stabilized. The number of citizens registered as unemployed has risen 3.5-fold since April 1, according to Russian Prime Minister Mikhail Mishustin.

“Despite growth in new orders, manufacturers continued to cut workforce numbers at the end of the second quarter amid signs of spare capacity and historically muted demand. Companies highlighted that redundancies and the non-replacement of employees were behind the solid fall,” IHS Markit said.

Consumer price inflation in the country slowed down to 0.3 percent month on month in May from 0.8 percent in April, while annual inflation totaled three percent, according to the latest data from the Russian Federal State Statistics Service. The Central Bank’s target rate for 2020 is four percent. Last month, the regulator slashed the key interest rate to an all-time low rate of 4.5 percent.

Price pressures softened as bottlenecks in supply chains were loosened and supplier stocks were rebuilt, the IHS Markit report said.

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