BOFIT Viikkokatsaus / BOFIT Weekly Review 2021/05

The acceleration of the covid-19 pandemic in Russia during the second half of 2020 reduced economic activity due to such factors as restrictions on personal movement. Late last year and apparently in January, however, the economic outlook seems to have brightened a bit, thanks in part perhaps to positive coronavirus vaccine news. The Markit IHS purchasing managers’ indices (PMIs) for Russia illustrate this current improving sentiment. More importantly, they augur a gradual return of economic confidence in Russia. The readings for the manufacturing PMI (50.9) and services PMI (52.7) both exceeded a neutral reading of 50 points in January, thus indicating increasing business activity. The last time both indices were above 50 points was in September 2020. Confidence about the future in services rose sharply to a level last seen in October 2019.

On the manufacturing side, seasonally adjusted production has grown nearly uninterrupted since last summer, but was still down from 2019 by 2.5 % in the fourth quarter of 2020 (the on-year change in December was -0.2 %). The production ceilings on crude oil output under the OPEC+ agreement continued to depress the mineral extraction sector, but manufacturing output increased by an impressive 4.4 % y-o-y in December (2.9 % in November).

In the fourth quarter of 2020, production of services fell by 13 % y-o-y. Services output collapsed by nearly 40 % in spring and the subsequent recovery has taken time. The construction sector last year managed to preserve production levels under exceptionally trying conditions. In the fourth quarter, construction grew by 0.8 % y-o-y.

PMI readings of Russian firms show a general expectation of improving conditions


Sources: Markit IHS, Macrobond and BOFIT.

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