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Russia’s Manufacturing PMI Was Little Changed in November

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Russia’s manufacturing PMI fell to 50.1 in November

Russia accounts for about 1.8% of the world’s GDP, and manufacturing activity accounts for ~15% of Russia’s GDP. According to Markit, Russia’s manufacturing PMI (purchasing managers’ index) declined slightly by 0.1 points to 50.1 in November, compared to 50.2 in October.

With this decline in manufacturing, the VanEck Vectors Russia ETF (RSX), the iShares MSCI Russia Capped ETF (ERUS), and the Direxion Daily Russia Bull 3X ETF (RUSL) fell by 0.72%, 0.24%, and 1.8%, respectively, as of December 1. Russian companies Mechel OAO (MTL), LUKOIL (LUKOY), Gazprom (OGZPY), and Mobile TeleSystems PJSC (MBT) may be impacted by poor manufacturing activity.

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Commenting on the Markit Russia Manufacturing PMI survey data, Samuel Agass, an economist at Markit, noted in a press release: “Operating conditions at Russian manufacturers remained broadly unchanged during November. This was highlighted by the headline PMI again staying close to the 50.0 no-change mark, signalling stabilisation in the sector. Expansions in output and new orders helped to just keep the headline figure in growth territory this month, where the sharpest rises in one year were reported.

“However, offsetting on these improvements were contracting staffing levels and a marked decline in pre-production inventories. Overall, the sector appears to be holding its ground, at least during the fourth quarter so far, after enduring a tough time throughout the majority of 2015.”

Output and new orders rose fastest, but growth remained modest

Although November production and incoming new orders rose at the quickest pace in a year, rates of growth were modest overall. The increase in new orders was attributed to an increase in domestic demand, which was linked to higher activity in the agricultural sector. However, new export orders contracted in November.

Among the sectors, consumer and investment goods producers saw a worsening of vendor performance, and a fractional improvement was noted in the intermediate goods sector.

Employment and inventory levels were lower in November

With outstanding work declining and the work backlog falling, manufacturers continued to cut jobs. The decline in orders has kept input purchases lower, and manufacturers were cautious about inventory levels. Most of the manufacturers used available stocks to fulfill new orders. Also, inventories of finished goods declined in November.

The Russian economy is showing resilience to the downturn in November, and easing inflation could give the economy a boost as the country’s economy is trying hard to remain in an expansionary phase.

In the next article, let’s see how Indian manufacturing is trending.

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