Russia Manufacturing Gauge Tops Forecasts as Ruble Drives Output

Russian manufacturers reported

improving conditions for a fifth month in November, exceeding

forecasts by economists as a weaker currency spurred output and

pushed input-price growth to the fastest in more than 16 years.

The Russia Manufacturing Purchasing Managers’ Index rose to

51.7, the highest in more than a year, from 50.3 in October,

HSBC Holdings Plc said in a statement, citing data compiled by

Markit Economics. That exceeded all estimates in a Bloomberg

survey of six economists, whose forecasts ranged from 49.9 to

50.2. Readings above 50 indicate expansion.

“Input prices surged at a rate not yet seen in this

century,” Alexander Morozov, chief economist for Russia and the

Commonwealth of Independent States for HSBC in Moscow, said in

the statement. “Manufacturers either benefit from substitution

of expensive imports or just misinterpret a temporary spike in

demand driven by the increased inflationary expectations.”

President Vladimir Putin is counting on domestic producers

taking advantage of the ruble’s record plunge to shield an

economy battered by nosediving oil prices and sanctions imposed

over the conflict in Ukraine. The surge of input costs raises

the likelihood of “double-digit” inflation in the coming

months and boosts the case for an increase in interest rates by

the central bank, according to HSBC.

The ruble has lost 29 percent against the dollar in the

past three months, the worst performer among 24 emerging-market

currencies tracked by Bloomberg. A lower exchange rate makes a

nation more competitive in selling goods.

Domestic Demand

Russian producers are benefitting from resilience in

domestic demand, which helped offset the 15th straight month of

falling new export business, according to HSBC. The

manufacturing industry has strengthened since July following

eight months of contraction as output and new orders increased,

it said.

Industrial output grew 2.9 percent in October, the most

since November 2012, expanding for a second month after zero

growth in August, according to data compiled by Bloomberg. The

economy of the world’s biggest energy exporter expanded 0.7

percent from a year earlier in the third quarter, slowing less

than forecast, even as the central bank said last month that

growth may be near zero next year.

The economy remains hamstrung by the biggest capital

outflow since 2008 and the fastest inflation in more than three

years. The central bank in October brought its key interest rate

to the highest since it was introduced in September 2013.

Consumer-price growth accelerated to 8.3 percent in

October, the fastest since July 2011. Policy makers have raised

their main rate four times by a cumulative 400 basis points

since March to rein in inflation.

“Rising prices at manufacturers predicts the continuation

of fast growth on consumer prices as well,” Morozov said. “The

pass-through effect from the weaker currency on costs and output

inflation is stronger this time, compared to the one observed in

the first half this year on the back of the first round of ruble

weakening.”

To contact the reporter on this story:

Ott Ummelas in Tallinn at

oummelas@bloomberg.net

To contact the editors responsible for this story:

Balazs Penz at

bpenz@bloomberg.net

Paul Abelsky, Andrew Langley

Article source: http://www.politico.com/story/2014/11/barack-obama-ozone-113204.html

Russian manufacturers reported
improving conditions for a fifth month in November, exceeding
forecasts by economists as a weaker currency spurred output and
pushed input-price growth to the fastest in more than 16 years.
The Russia Manufacturing Purchasing Managers’ Index rose to
51.7, the h...

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