Russian manufacturing activity shrinks faster in July: PMI

MOSCOW (Reuters) - Activity in the Russian manufacturing sector shrank faster in July as the crisis sparked by the novel coronavirus and poor demand weighed, the Markit Purchasing Managers' Index (PMI) survey showed on Monday.

The index's headline reading fell to 48.4 from 49.4 the month before, remaining below the 50.0 mark that separates expansion from contraction for the 15th month in a row.

"Although output expanded, manufacturing sales fell back into contraction territory amid challenging demand conditions and hesitancy among clients," said Sian Jones, an economist at IHS Markit, which compiles the survey.

Having plunged to a record low of 31.3 in April, the first month of pandemic-related lockdowns in Russia, the headline PMI index has recovered steadily. The output component expanded in July for the second straight month.

But demand remained weak due to uncertainty related to the pandemic, capping inflation in the sector despite an increase in prices for imported goods.

Even though companies have further reduced workforce numbers in an attempt to cut costs, the degree of optimism inched up to a six-month high in July.

"While it is encouraging to see confidence improving among goods producers, our latest forecast is for a 6.4% annual contraction in industrial production in 2020 and a slow recovery in output to pre-pandemic levels," Jones said.

(Reporting by Andrey Ostroukh; Editing by Hugh Lawson)

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