Russian manufacturing shows best results in 5 months

AFP Photo / Manpreet Romana
Russian producers kept on waving away the economic crisis in September, as people increased their spending. Experts warn that it could be fear of prices going up that underpinned the rise in domestic demand.

Manufacturing companies in Russia said operating conditions in September improved for the second consecutive month, which marks the best reporting period in 5 months. Russia’s Manufacturing Purchasing Manager Index (PMI) rose to 52.9, going above the long-run survey average of 52.1. Last month the indicator stood at 52.4.

The headline index has now remained above the no-change mark of 50.0 for the past 13 months; a reading above 50 points signals growth in the sector.

New orders from Russian companies grew their fastest since March 2011, becoming a key driver of overall September growth. Underpinned by higher demand, production growth also accelerated, reaching its 19-month high.

“… domestic demand rules, once again shielding Russia from the headwinds blowing from the struggling Eurozone economy,” Aleksandr Morozov, Chief Economist for Russia and CIS at HSBC, said in a comment.

“Our only concern is that producers might be confusing a genuine pickup in demand for their goods with the rise in inflationary expectations that can boost demand only temporarily,” Morozov added.

The report on Russian manufacturing came a day after Eurostat – the EU's statistics office – reported a historic high unemployment rate of 11.6% in the Eurozone in September. That came on the back of poorer business confidence in the region, with companies reducing their costs by cutting stuff.

“We’ve become more pessimistic,” Christoph Weil, an economist at Commerzbank AG in Frankfurt, toldBloomberg Businessweek, adding that he expected a recovery to start in the 2Q 2013.