Bloomberg News

Russian Manufacturers Face ‘Lasting Stagnation,’ HSBC Says

October 03, 2011

(Updates with September cargo data in fifth paragraph.)

Oct. 3 (Bloomberg) -- Russian manufacturing stalled last quarter as foreign demand for the country’s goods weakened, threatening the government’s plan to lift economic growth.

The Purchasing Managers’ Index rose last month to a seasonally adjusted 50 from 49.9 in August, HSBC Holdings Plc said today, citing data compiled by London-based Markit Economics. The average of 49.9 in July-September was the lowest since the fourth quarter of 2009 and contrasted with the post- crisis high of 54.8 for the first three months of 2011, HSBC said.

“Russian manufacturers face lasting stagnation,” Alexander Morozov, HSBC’s chief economist for Russia, said in the statement. “In seasonally adjusted terms, demand weakness has become more and more apparent, especially as far as external demand is concerned.”

Europe’s debt crisis and slowing growth in the U.S. have raised concern that the global economy will weaken, reducing demand for Russian exports of energy and metals. The trade surplus narrowed in July, the last period for which data are available, as import growth outstripped exports. Manufacturers faced a slide in new export orders for a third straight month even as the ruble weakened, HSBC said.

Rail Cargoes

OAO Russian Railways shipped 3 percent more cargo in the first nine months of the year than in 2010, the state rail monopoly said today in an e-mailed statement. The annual rate of growth in cargo volumes slowed in September to 0.6 percent.

Rail shipments are seen as a proxy for changes in output because railroads account for about 85 percent of the nation’s cargo transport, excluding pipelines, according to VTB Capital.

“Economic growth in OECD countries has been slowing down and the recession risk has increased,” Morozov said, referring to the Organization for Economic Cooperation and Development. “The sustainability of external demand in Russia is predominantly based on demand growth from China and other Asian markets.”

The International Monetary Fund cut its forecasts for global growth last month and said commodity prices would decline in the second half of the year and into 2012. The Russian government expects the nation’s economy to grow 4.1 percent this year, faster than the 3.4 percent rate seen in the second- quarter.

Urals crude, Russia’s main export oil blend, fell 12 percent in September, sparking a 10 percent drop in the ruble against the dollar. The Russian currency fell 7.1 percent last month against a dollar-euro basket the central bank uses to manage swings that harm exporters.

--With assistance from Ilya Khrennikov in Moscow. Editors: Paul Abelsky, Andrew Langley

To contact the reporters on this story: Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net; Scott Rose in Moscow at rrose10@bloomberg.net

To contact the editors responsible for this story: John Viljoen at jviljoen@bloomberg.net; Balazs Penz at bpenz@bloomberg.net


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