Russian manufacturing contracted at its second-fastest pace last month as companies continued cutting production and jobs amid collapsing demand at home and abroad, VTB Capital said.
VTB’s Purchasing Managers’ Index (PMI) rose to 34.4 from December’s record low of 33.8, the bank said in an e-mailed statement yesterday. The length of the contraction was one month short of the slump that occurred during the 1998 economic collapse, when the government dropped its support of the ruble and defaulted on US$40 billion of domestic debt, the bank said.
A figure above 50 means growth and below 50, a contraction. The bank surveyed 300 purchasing executives.
“Levels of output and domestic and export orders remained very close to their historical lows,” Dmitry Fedotkin, an economist at VTB Capital in Moscow, said in the report. “Employment conditions deteriorated further.”
Russia’s economy will probably contract 0.2 percent this year, the Economy Ministry forecast, as prices for the country’s key commodity exports tumble on slumping global demand. That will contribute to a 40 percent decline in state revenue this year, Finance Minister Alexei Kudrin said on Friday, meaning the government would need to rewrite the budget with its first deficit in 10 years.
Unemployment rose in December to 7.7 percent from 6.6 percent the month before.
Prices that manufacturers pay and charge continued a decline that began in November, the report said. Still, the lower cost of oil products and construction material wouldn’t be felt in full because of the ruble’s slide against the US dollar, VTB said.
“There were numerous reports from panelists that the weaker ruble had partially offset the impact of falling global commodity prices, resulting in a slower overall rate of deflation,” the report said.
Bank Rossii expanded its trading range for the ruble 20 times since the middle of November before policy makers switched last week to let “market” forces help determine the exchange rate within a widened limit.
The central bank has drained more than a third of its foreign-currency reserves, the world’s third-largest, since August to stem the ruble’s 34 percent slide against the dollar.
Investors are betting against the ruble as a 69 percent slump in oil prices in the past six months weakens the economy, triggering Russia’s worst financial crisis since 1998. Some US$290 billion has left the country since August, BNP Paribas SA said.
The PMI is derived from indexes that measure changes in output, orders, employment, suppliers’ delivery times and stocks, VTB said.
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