A Different Voice wrote:
sepheronx wrote:But they should reduce imports further and try to push more export such as food.
Reducing imports will become harder going forward due to the appreciation of the Ruble recently making imports more attractive then they were toward the end of 2015.
However, with the value of oil up sharply from its lows, the total $ value of Russian exports may also rebound shortly. I also think sanctions/bad blood with trading partners won't get any worse going forward.
They will have to curb it cause imports will cause damage to Russian economy. Funny thing is too, that manufacturing PMI dropped. Mostly I imagine from auto sales (since automotive is a fair % of overall Russian manufacturing base), all the while documented growth (major) in area like heavy machinery (trucks, agriculture, etc) plastics and food. Yet still an overall drop. I think Russian economy is too reliant on auto sales it seems.
Consumers are doing what they do best, hurt their own economy. Consumer spending dropped as well, which brings in the results we see.
Other issue is we don't get a full picture so it is hard to determine what's going on.
I bet the PMI does not involve the military industrial complex. I can't believe that the automobile industry is such a big player. Russia is not
Germany or Japan and it does not have huge automobile exports. So the fraction of this industry in Russia's GDP has to be much smaller.
It outright employs roughly 700,000 people in Russia and supports over 2.2 million in terms of parts and services. So it is a huge part of the manufacturing process. Because if you look at other manufacturing types, there is a boom: Textiles are booming as outside companies are looking at local producers to make clothing cheaper for Russian market, energy equipment sales surge as import substitution looks to modernizing old wells or export of high tech like Rosatoms massive outstanding contracts and same with Power Machines and their equipment sales, to agricultural machinery entering markets they never did before. Only real industry that has seen a massive drop was automotive in Russia. So this is the only thing I can think of. Unless someone else has other data on the breakup of sectors in the manufacturing industry that are accounted part of the PMI.
Don't forget, the PMI only looks at roughly 300 companies, and employment is part of the calculations as well (20% of it). Since employment is dropping or at least with various companies mixed with Automotive industries constantly stalling production and thus shutting down production for months on end, gives me the indication that is the industry they mostly look at.
If you look here: http://www.tradingeconomics.com/russia/manufacturing-pmi You will see that the PMI has been low for quite some time, yet we here that average profit for companies in 2015 in Russia was 48%. So if that is the case, then something is wrong here, cause a company cannot profit if they don't operate. But then again, the measurements are interesting to say the least:
following weights: New Orders (30 percent), Output (25 percent), Employment (20 percent), Suppliers’ Delivery Times (15 percent) and Stock of Items Purchased (10 percent), with the Delivery Times index inverted so that it moves in a comparable direction.
So they put emphasis on other things that may not really make much sense to add in - employment (for instance, factories with all automation will have a minimum to no workforce, so does that mean they do not grow?) and suppliers delivery times.