The HSBC Russia Manufacturing PMI (Purchasing Managers’ Index) came in at 51, the same as in July, HSBC reported. Any figure above 50 signals growth.
Economists were surprised by the rise, given the economic isolation imposed by several countries. The Russian Economy Ministry announced in August that the country’s GDP had shrunk for two successive months – by -0.2% in July and -0.1% in June.
August’s figure was only the third reading over 50 in the last 14 months.
Manufacturing growth was positively influenced by:
- suppliers’ delivery times,
- new orders, and
However, growth of new orders and output was weak, the report added, while new export business continued to fall.
Input price inflation rose for the first time in five months, due to a weaker ruble and some shortages. Output prices also picked up. However, overall, inflationary pressures were relatively moderate in the context of previous survey data.
Russia set for a bad year
For Vladimir Putin, 2014 will probably be the worst year for GDP (gross domestic product) growth since he took office in 2000 (apart from the 2009 crisis year).
The country was already in trouble before the United States, the European Union and other allies imposed economic sanctions over the Ukraine crisis and Moscow’s retaliation with a ban on food imports. The two factors are expected to hurt Russia’s economy.
Alexander Morozov, chief economist at HSBC in Moscow, said:
“Overall, Russian manufacturing holds up surprisingly well against various headwinds. In this respect, the import substitution policy that the government has made a priority can provide support to the manufacturing sector in the short-term.”
Import ban good for Russia?
In a surprising statement, the Russian government told its people that the ban on some foods and agricultural products will be good for the economy by helping domestic producers expand without competition from the EU and other countries.
However, before local producers have a chance to respond to a sudden increase in demand, there are likely to be shortages and upward pressures on prices.
According to Mr. Morozov, August’s PMI price indexes are already showing that this is happening in Russia.
The European Union has threatened to increase economic sanctions if Russia does not reverse its course in Ukraine within a week.