Russian manufacturing contracted less than economists estimated last month, supplying further evidence to policy makers lauding a stabilization of the recession-ravaged economy.
The Purchasing Manager’s Index rose to 49.6 in May from 48 in April, according to a statement released by Markit Economics on Wednesday.
The median of six estimates in a Bloomberg survey was 48.5, below the threshold of 50 that separates contraction from growth. The improvement in the overall index was driven by growth in production and job creation “evident for the first time in 35 months,” Markit said.
“Although falling demand for Russian goods remains a worry for policy makers, output returning to expansion territory and workforce numbers increasing, albeit in each case only marginally, highlights that the worst may have passed,” Samuel Agass, an economist at Markit, said in the statement. “With input buying rising at the fastest pace for 18 months, companies look set to boost production in the coming months if new orders pick up.”
The economy of the world’s biggest energy exporter is adapting to low oil prices. Gross domestic product declined 1.2% in the first quarter from a year earlier, the smallest drop since the contraction began at the start of 2015. In the absence of external shocks, growth may return in the “coming months,” according to estimates by the central bank’s research and forecasting department.
The Micex Manufacturing Index of 11 stocks has declined 1.60% this year, underperforming the broader Micex Index, which is up 8.06%. The ruble, which is down almost 20% in the past 12 months against the dollar, was 0.2% stronger at 66.55 versus the US currency in Moscow.
A Technologically Backward Country
Former finance minister Alexei Kudrin has urged President Vladimir Putin to reduce geopolitical tensions for the sake of the Russian economy, Tass quoted the Vedomosti newspaper on Monday.
Kudrin, the current chairman of Russia’s Center for Strategic Research, told members of the president’s Economic Council that Russia was “a technologically backward country.”
Russia must integrate itself into international supply chains to narrow the technological gap and must reduce geopolitical tensions to achieve that, Kudrin said.
Russia’s economy has been reeling from falling oil prices and western sanctions over Moscow’s role in Ukraine conflict since 2014. The president’s Economic Council was convened last week to discuss measures to boost the economy.
In the meeting’s closing speech, Putin said that while Russia lagged behind in certain areas, the country had a thousand year history and that he would defend its sovereignty to the end of his life.
