Russian Manufacturing Gauge Returns to Growth as Output Surges

(Bloomberg) -- A gauge tracking Russia's manufacturing industry jumped to the highest level since November 2014, topping economist forecasts as domestic demand powered gains in orders and output.

The Purchasing Manager's Index surged to 51.5 in June from 49.6 in May, rising above the threshold of 50 that separates contraction from growth for the first time since last November, Markit Economics said Friday in a statement. That was better than every forecast in a Bloomberg survey of six economists, whose median estimate was was for an advance to 50.

“Russian manufacturers enjoyed one of their most prosperous months for almost two years,” Markit economist Samuel Agass said. “The rise stemmed from the domestic market only, as new export orders contracted further.”

Gains by manufacturers are increasingly diverging from the downturn among consumers, who've endured the brunt of Russia's longest recession under President Vladimir Putin. While industrial production expanded for two months, domestic spending remains in distress after authorities responded to the collapse in oil prices by allowing the ruble to weaken.

The Micex Manufacturing Index of 11 stocks has retreated 2.1 percent this year, underperforming the broader Micex Index, which is up 7.4 percent. The ruble has gained 15 percent against the dollar in 2016.

“Encouragingly, goods producers look intent on fueling output growth,” Agass said. “With backlogs also edging closer to stabilization, Russia's manufacturing sector could be set to shift into a higher level of growth over the second half of 2016.”

To contact the reporter on this story: Mark Evans in London at mevans8@bloomberg.net. To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net, Paul Abelsky