March PMI indicators suggest Russian economy already contracting

Readings of the Markit Economics purchasing manager indices for March show contractions in both manufacturing and service branches. The readings were lower than in March 2020, when the outbreak of the covid pandemic began to affect the global economy. The manufacturing PMI, which had a reading of 48.6 in February, fell to 44.1 in March. The services PMI dropped from 52.1 in February to 38.1 in March. Readings below 50 are usually construed as evidence of a contracting economy. The March composite PMI reading was 37.7, suggesting a broad-based contraction in actual production was already underway in March. Even so, industrial output still grew by 6.3 % y-o-y in February and manufacturing was up by 6.9 %. The volume of retail sales rose by 5.9 % in February.

Rosstat this week also released figures on the structure of 2021 GDP. The Russian economy grew by 4.7 % last year. On-year growth accelerated in the fourth quarter of 2021 to 5.0 %. Seasonally adjusted GDP grew by 1.5 % q-o-q. Russian GDP surpassed 4Q19 GDP already in 2Q21, indicating Russia’s initial recovery from the Covid Recession was fairly swift.

Branches hit hardest by the covid pandemic and lockdown measures in 2020 experienced the highest growth last year. For example, the value added of the hotel and restaurant branch was up by 24.1 % in 2021, while wholesale and retail sales rose by 8 % and construction by 5.8 %. Mineral extraction industries grew by 4.2 %, and manufacturing value added was up by 4.5 %.

Russian purchasing manager indices showed a distinct downturn in output in March

Sources: Macrobond, Markit and BOFIT.