August HSBC PMI index remains weak with manufacturing lacking demand

Russian manufacturing sector suffers a lack of demand, with August HSBC PMI index remaining weak
August became another month of stagnation for Russian manufacturing, with the HSBC Russia Manufacturing PMI remaining below 50.

A continuing contraction of new orders was the main factor restraining manufacturing sector in Russia in August, keeping PMI at 49.9, which indicates the third contraction in the last 4 months.A PMI reading above 50 points to growth, with below 50 pointing to economic contraction.

However, production grew slightly in August, which drove backlog of works down for the 23rd consecutive month, HSBC added.Alexander Morozov HSBC Chief Economist, said increased August production volumes reflected optimism among Russian producers, despite foreign demand and competition remaining an issue.

“Manufacturers retained optimism in August, increasing output despite the continuing stagnation of new orders. In particular, export demand keeps disappointing, posting a decline for the second month in a row, with some firms reporting increased competition with foreign firms. Further marked deceleration of input and output prices growth accompanied subdued output gains in manufacturing in Russia. Overall, the Russian manufacturing sector appears to be aligned with a global trend of weak manufacturing and industrial growth in recent months.”

Morozov noted that although the August PMI reading was disappointing, the coming months will be key to determining the direction for Russian manufacturing.

“Reading the August HSBC Russia Manufacturing PMI report, optimists will point to the stabilization of output growth rates in low yet positive territory, and declining inventories. They rely on a stabilization, or moderate improvement in, global manufacturing that would sustain output growth in Russian manufacturing. Pessimists will find some analogy in the recent manufacturing PMI numbers with those of August-September 2008. The next couple of PMI releases will be the key to prove whether such analogy makes sense or not. Let us be in the optimists’ camp.”