Russian Manufacturing Pace Slows From Eight-Month Peak, HSBC Survey Shows

Russian manufacturing growth eased in December from an eight-month high after new orders slowed and export demand weakened, HSBC Holdings Plc said.

The HSBC Purchasing Managers’ Index fell to 51.6 in December from 52.6 a month earlier, HSBC said today in an e- mailed statement, citing data compiled by London-based Markit Economics. A level above 50 signals an expansion.

Russia is counting on domestic consumption, fueled by rising wages and slowing inflation, to boost the economy. Slowing demand abroad led OAO Uralkali (URKA), the country’s largest fertilizer maker, to cut its 2012 output target this month. A downturn in Europe, which accounts for almost half of Russian trade (RUCREC), poses “significant” risks to the economy next year, the International Monetary Fund said this month.

“Momentum in manufacturing eased in December, following the surprising spike in economic activity in the previous month,” Alexander Morozov, chief economist for Russia and the Commonwealth of Independent States at HSBC in Moscow, said in the statement. “Manufacturing keeps growing, but slowly.”

The Micex Manufacturing Index (MICEXMNF) of 11 stocks fell 1.5 percent to 1,697.87 at the close of trading in Moscow, the lowest level since Oct. 7. The exchange’s benchmark gauge rose 0.3 percent to 1,387.06.

Lower Orders

New orders for manufacturers, the most important component of the index, were lower than in November, and new export business fell for the first time since September, HSBC said. The gauge, which measures overall business conditions, averaged 51.8 this year, the same as in 2010, according to the statement.

Russia, the world’s largest energy exporter, may expand as much as 4.5 percent this year after a 4 percent gain in 2010, according to Deputy Economy Minister Andrei Klepach. Economic growth will slow to 3.7 percent in 2012, the government forecasts. Prime Minister Vladimir Putin said he is seeking increases of at least 6 percent annually to make Russia one of the world’s five largest economies.

OAO Gazprom (GAZP), Russia’s largest company by market value, said yesterday that exports of gas to markets outside the former Soviet Union will be lower than forecast this year. OAO TMK, the country’s No. 1 maker of pipes for the oil and gas industry, said in November that a worsening economy would slow growth in the fourth quarter.

Chinese Conditions

The steel industry has also faced more difficult conditions as China, the world’s second-largest economy, tries to contain inflation by raising interest rates and curbing growth (CNGDPYOY). Economic expansion there fell in the third quarter to the slowest pace in two years.

Magnitogorsk Iron & Steel (MAGN), the Russian steelmaker controlled by billionaire Victor Rashnikov, said this month it was operating at about 80 percent capacity in the fourth quarter, down from 90 percent in the previous three months. OAO Mechel (MTLR), the nation’s biggest producer of coal for steelmakers, said it reduced capital spending and was reviewing fourth- quarter production after declines in coking coal prices.

There is a “higher probability” that growth in manufacturing will slide further, HSBC’s Morozov said. Russian companies are relying on domestic demand to boost new orders, he said in the statement.

“Output growth is faster than growth of new orders, which suggests that output growth should moderate,” Morozov said. “Secondly, new export orders stopped growing again in December, which usually translates into a moderation of overall growth momentum.”

To contact the reporters on this story: Scott Rose in Moscow at rrose10@bloomberg.net; Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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