The Purchasing Managers' Index (PMI) for Russian industry, calculated by S&P Global, stood at 52.6 points in June, down from 53.5 the previous month. Despite a slight decline, a value above 50 points indicates an increase in business activity. The index’s lowest value since the start of the war in Ukraine was recorded in March 2022 (44.1), but by May, the index had risen above 50 points. The value remained close to this level for several months until it jumped above 53 in November, reaching a five-year high. A similar picture of anomalous optimism has been observed in other surveys. Production and new orders remain at comfortable levels, and purchasing activity has reached a 15-year high, according to the analysts at S&P Global. The latest measurement demonstrates that, while there is a relative slowdown, recovery growth continues. At the same time, the analysts note that costs have also been rising at the fastest pace since April 2022 as a result of the significant weakening of the ruble.
Estimates of industrial dynamics in May, published by Rosstat at the end of June, paint a similar picture. According to calculations by the Centre for Macroeconomic Analysis and Short-term Forecasting (CMASF) provide a similar but slightly more cautious estimate, reporting a 0.6% growth in May after a 1.4% growth in April. However, the index of industrial production intensity, calculated by experts at the Higher School of Economics (HSE) under the guidance of Vladimir Bessonov, does not show any growth at all. However, according to Bessonov, 'some deceleration in May does not indicate a slowdown in growth, as it is caused by the peculiarities in calendar adjustment.' Moreover, according to Rosstat data and CMASF estimates, industrial production had already reached pre-war levels by the end of the year, the index calculated by HSE has recouped approximately two-thirds of the decline.
Among the positive trends observed in May, CMASF highlights a slight increase in oil production, continued active growth in the production of construction materials (seasonally adjusted, the growth in May was 4.5% compared to February 2022 ), and electrical equipment (15% growth compared to February 2022 ). There continues to be a high level of production of computers and electronics (+27.4%), there is a 'significant' growth in the automotive industry (+15% compared to the previous month), and the pulp and paper industry has almost reached growth levels beyond recovery (the volume of output has returned to the level of February 2022). The main negative trends include the ongoing decline in gas production (in May the decline accelerated to 11.4% year-on-year, compared to 10% in April) and a noticeable decrease in petroleum product manufacturing. However, according to sources from 'Kommersant,' oil companies began to see a growth in oil product production in June as a result of the completion of refinery repairs.
In spring, Rosstat stopped publishing data on Russian oil and gas production. According to CMASF estimates, the extractive industry, which holds the greatest weight in the structure of industrial production, is stagnating. The Telegram channel 'Tverdye tsifry' (Hard Numbers) estimates that year-on-year growth to May 2022 was at 1.8%. The sectors of the manufacturing industry that are closely associated with the military-industrial complex demonstrate impressive growth in May and in recent months. These include the production of finished metal products, electrical equipment, electronics, and optics. The production of protective clothing and navigation instruments have also seen impressive growth. On the whole, according to CMASF estimates, the dynamics of manufacturing are already higher than they were before the full-scale invasion of Ukraine. According to experts at HSE, the intensity index is nearing the level of December 2021 but has not yet reached it. At the same time, the production of durable goods, for example, despite significant growth in recent months, remains in deep trouble: -29.6% compared to May of the pre-pandemic year 2019.
The CMASF experts note that the increase in manufacturing activity for the third consecutive month is of a frontal nature, meaning it affects most major economic activities. Prior to that, as Re: Russia has already reported, trends across sectors were diverse and appeared less stable. The peculiarity of this crisis is that the economic recovery began not in the industrial sector but in sectors where there was no or little decline, write the analysts from HSE in a report assessing the production of goods and services by basic types of economic activities for January-May 2023. They did not observe the 'transition to intensive recovery' in manufacturing until February of this year. However, Vladimir Bessonov warns that such frontal recoveries are observed 'only occasionally during a short phase of intensive post-crisis recovery.'