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Oct. 11, 2017
As the Russian economy continues to recover from recession, solid growth in the manufacturing and service sectors points to the emergence of stronger demand. Relatively muted inflation and falling interest rates, however, may be themes that continue throughout 2017.
Russian firms have seen a solid progression throughout 2017 so far, with both manufacturers and service providers indicating a sustained recovery in operating conditions. The IHS Markit Composite PMI Output Index suggests that the Russian economy is on course for the best year since 2007. The latest PMI data signalled a sixth successive quarter of growth, the longest sequence of expansion since late-2013.
Official GDP data signalled solid year-on-year growth of 2.5% in the second quarter, with the Composite PMI suggesting another robust performance in the third quarter. The PMI does not include construction and retail, however, and weak performances in these sectors have caused a drag on overall figures in the past. In 2016, PMI component sectors signalled GDP growth of 0.8%. This signalled stronger underlying GDP than was suggested by the final official data, which indicated a 0.4% contraction.
September survey data indicated a further improvement in business conditions in the manufacturing sector, extending the current sequence of growth to 14 successive months. Following an inconsistent performance during the middle of 2017, the IHS Markit Russia Manufacturing PMI signalled a solid overall improvement across the sector in Q3.
Meanwhile, the New Export Orders Index signalled growth in sales from abroad for the first time in four years in September. Anecdotal evidence from the latest survey suggested exports increased due to new client demand, following years of contraction driven by sanctions.