The search for the bottom: both the government and the experts differed in assessing the situation in the economy

Business activity in the manufacturing sectors of Russian industry in July, resumed its decline, unexpectedly showed the index of purchasing managers (PMI) by Markit. According to a 1 August press release, the research company, the seasonally adjusted Markit PMI index for Russia fell in July to 49.5 from June’s value at 51.5 (a reading above 50 means growth, below 50 a decline). Thus, June and remained for the Russian processing exception — the only month out of the last eight, in which business activity has expanded.

Last month, Rosstat reported that industrial production in the second quarter of 2016 grew in annual terms by 1% — the first time in six quarters. But even then, economists at the Gaidar Institute warned that the emerging trend was the growth could not be maintained. Interestingly, businesses mainly assess how “normal” their stocks of finished products, production capacity, financial status, etc., says in the latest monitoring of the economic situation from the Gaidar Institute and Ranepa, and the current reserve of unused capacity amounts to 16 percentage points, says head of business surveys Department, center for Real sector Gaidar Institute Sergey Tsukhlo. The problem is that the underlying demand for Russian goods remained weak, says Markit, explaining the July decline in business activity in the treatment of, and paid to demand limits is added to the relatively low productivity growth in the industry in General, experts say the HSE in the next edition of “comments of the state and business”, published on Monday.

Enterprises are unable to fully take advantage of the weakening of the ruble, economists say the HSE. “It is obvious that the resulting cost advantages have not yet been able to compensate for the lack of competitiveness of Russian enterprises in foreign markets, otherwise, the remaining capacity could be directed towards production for export, and then strong decline of industrial production would be observed,” — says the publication is a leading expert of the Center for development HSE Mykola Kondrashov.

Despite the increase in recent months, industrial growth rate, the dynamics with the removed seasonality in the last half tells rather about the continuation of stagnation, says another expert HSE Valery Mironov, and calls the recovery in industry “apparent”. This is not consistent with the Bank of Russia estimates, which on Monday said that in June continued gradual recovery in manufacturing activity, although it estimated the annual rate of decline in GDP in the second quarter (Rosstat data yet) in 0.2–0.4%. The authors of “Review” of the HSE, do argue with the latest estimates of the Central Bank, noting that they are looking at what is happening in the macroeconomic processes “more pessimistic”, and urging the Bank “to make an extra effort to prove to the expert community of the correctness of their calculations and the validity of their judgments”.

I bet HSE experts and with macro-economic assessments, the economic development Ministry, which last week wrote in the monthly monitoring that the seasonally adjusted decline in GDP “almost stopped” in April was minus 0.2% in may to minus 0.1%, and in June already zero). In contrast, HSE’s economists argue that the economy has not reached the bottom of the fall: January—June 2016 the economy has suffered a small correction, and still a real recession. The compression process of the economy is “a broad front across all sectors, they write. “He completed only the first, the most acute phase of adjustment of the economy to the “new normality”. The economy again started to decline, breaking through the bottom, and GDP, which characterizes the production of the economy as a whole, struck bottom in the first quarter of 2016, and in the second quarter, according to our estimates, was 1.4% below the bottom and 5.5% below average in 2014″, — stated in the publication.