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Russian Economy Keeps Growing

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This post first appeared on Russia Insider


The narrative in the western media is that Russia's economy is stumbling due to sanctions, but this is incorrect.  Russia's economy is actually growing, according to global investment banks.  Deutsche Bank predicted 0.5% for the 3rd quarter.

Here's fresh evidence.  Russia’s PMI just posted its second gain for 2014 and its third gain in the past 14 months. It should be noted, however, that manufacturing only makes up around 16% of the Russian economy and thus changes in this indicator will not necessarily predict changes in GDP as a whole.

And here is EU PMI by comparison:

Ouch!

 

The chief economist for Russia and CIS at HSBC writes:

“The Russian manufacturing sector held up well in August, continuing its slow expansion, the HSBC Russia Manufacturing PMI survey revealed. New orders grew at the fastest (albeit still very moderate) rate this year.

Output and quantity of input purchases kept growing too.  Apparently, this growth should be solely attributed to local demand as new export orders have been steadily declining for one year already.

By broad sector, the consumer goods sector was a clear outperformer, reporting not just output growth, but also a strong rise in new work, a rise in new export orders, and an increase in outstanding business.”

The Russian PMI is particularly impressive given the declining situation in Europe; their PMI Manufacturing was released today and showed a fairly strong fall-off in growth in August continuing the slide which started in January.

Germany posted its worst figures in 11 months – albeit remaining the positive, while France reported another contraction and its fastest rate of contraction in 15 months.

The falloff in European growth, mixed with the improving situation within the Russian economy leads to a lower likelihood of more sanctions behind imposed by Europe as their economy is dangerously close to a third recession in six years. 

 

What is “Manufacturing PMI”?

The PMI survey is a monthly gauge administered by HSBC and Markiteconomics about the health of the economy on the basis of a quantifiable questionnaire given to CEO’s and management of a random group of companies within a country. There are two surveys that are released at the beginning of each month; Manufacturing and Services. In each survey, typical questions ask whether the company to gauge factors such as output, new orders, inflation and employment.

There are PMI surveys for every country in the world and a score above 50 indicates expansion, while a score below 50 indicates contraction. The accurate nature of the PMI index varies by country and can be affected by a whole host of reasons such as sampling and the size of the state in the economy (the state does not participate in the interview). Thus the survey is a predictor of growth, and given its timely release is seen as one of the most forward looking indicators in the financial and economic world. 


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