HSBC Manufacturing PMI improves further in March

Russian manufactoring intensification
The HSBC Manufacturing Purchasing Managers Index, a composite index tracking overall business conditions in the manufacturing sector, has improved further in March to 55.6, the highest figure since August 2006.

The survey of the Russian manufacturing sector, undertaken by Markit Economics continued to build on a positive start to 2011 driven by increasing new domestic orders.  Alexander Morozov, chief economist Russia and CIS at HSBC says the figures point to a manufacturing sector that can barely keep pace with rising demand, increasing employment, and falling inventories.

“According to the PMI index of manufacturing industries in Russia HSBC's growth in the manufacturing industry in Russia reached 4.5 year high in March. At that time, as growth in export demand has slowed down slightly, domestic demand is significantly increased, prompting manufacturers to continue active recruitment of staff.”

The data pointed to the manufacturing workforce increasing for the sixth consecutive month as new orders recorded its strongest growth in three years.  The survey also showed that input price inflation slowed for the second month running in March, but remained very pronounced overall according to Morozov, who indicated he thought this would be passed onto consumers.

“Despite the fact that price pressure from costs fell sharply in March, it is at historically high levels. Growth rates of product prices have soared, apparently reflecting the increasing ability of producers to shift all the more rapid increase in costs to their customers against a background of strong customer demand. This allows us to expect continued high growth rate of producer prices in March.”

Morozov also said that, after the Central Bank held back on lifting rates earlier in March, that the current monetary stance appeared soft, with inflation fueled by strong demand and heightened crude prices also remaining pronounced.

“We believe that the official data on industrial production growth will show it soon. This is consistent with what would be expected after the jump in oil prices. We believe that there are good chances that the high growth in manufacturing will continue in the short term. From the perspective of the situation in the industry, the current monetary policy looks too soft because of the dominance of inflation risks.”