Manufacturing PMI reached 54.5 points

The first leading indicators of the state of Russian industry show multidirectional dynamics in September. The manufacturing PMI index reached 54.5 points against 52.7 points in August, according to S&P Global. This is the most significant improvement in operating conditions in the sector since January 2017. It occurred against the backdrop of rapid growth in new orders due to high domestic demand and the launch of new products. Also recorded are the highest hiring growth rates since November 2000 and the highest cost inflation since March 2022, reflecting high demand for raw materials and logistics problems. Companies note unfavorable fluctuations in the ruble exchange rate, which have caused an increase in the cost of imports. However, growing demand allowed them to pass on their costs to customers: selling prices grew at the fastest pace since April 2022.

Note that, according to other data – the Gaidar Institute (IEP), there was no increase in demand. However, in September, industrial output still grew – thanks to a shortage of finished goods stocks in warehouses (it increased to the level of the end of 2021) and record optimism in sales forecasts since the beginning of 2022. At the same time, the shortage of imported components remains a significant problem for enterprises. 82% of respondent companies want the ruble to strengthen to reduce costs. A strong ruble is also needed for enterprise investment and domestic demand. This, according to the author of the study, Sergei Tsukhlo, is explained by “both the continuing dependence of domestic production on increasingly expensive imported components, and the desire of buyers to stock up on rising and disappearing imports to the detriment of purchases of Russian products.” Only 8% of enterprises associated the growth of domestic demand with the depreciation of the ruble.

Industry investment plans have lost optimism for the second month in a row – after the July high since the beginning of 2022. The staffing shortage is forcing businesses to maintain hiring and keeping hiring plans near historic highs. Unlike S&P Global, the IEP notes a sharp (from +24 to +10 points) September slowdown in the growth of selling prices and a slightly less significant decline in enterprises’ inflation expectations.

Artem Chugunov