Russian October manufacturing activity contracts at fastest pace in 5 months - PMI

MOSCOW, Nov 2 (Reuters) - Russian manufacturing activity contracted in October at its fastest rate in five months, hit by a renewed fall in output and the ongoing negative impact of the COVID-19 pandemic, a survey showed on Monday.

IHS Markit’s Purchasing Managers’ Index (PMI) fell to 46.9 in October from 48.9 in the previous month. It has stood below the 50 mark that separates expansion from contraction every month but one since June 2019, exceeding the threshold only in August 2020.

“Weak domestic demand conditions weighed on hiring decisions as voluntary leavers were often not replaced amid burgeoning spare capacity and efforts to cut costs,” said Sian Jones, an economist at IHS Markit, which compiles the survey.

The contraction in new orders was even faster, while subdued demand weighed on business expectations, with optimism also slipping to a five-month low, but remaining above 50 on hopes than an end to the COVID-19 pandemic was in sight.

At the same time, input price inflation gained pace to the fastest since August 2018, although firms were able to partially pass on higher costs to clients. Output charges rose along with cost burdens as the value of the rouble fell, pushing the uptick in purchase prices above the series average.

“Our latest forecast anticipates that the Russian manufacturing sector will remain in contraction until the second quarter of 2021, as challenging domestic demand and ongoing uncertainty regarding the pandemic are expected to weigh on the recovery,” said Jones. (Reporting by Alexander Marrow; Editing by Toby Chopra)