Bloomberg reports more devastating bad news for the Putin regime:
Russian manufacturing shrank more in November than during the 1998 financial collapse as the global economic crisis drove output and new orders to record lows and companies cut jobs, VTB Bank Europe said.
VTB’s Purchasing Managers’ Index fell for a fourth month to 39.8, its lowest level, from 46.4 in October, the bank said in an e-mailed statement today. The previous low was 43.2 in September 1998, a month after the government’s ruble devaluation and default on $40 billion of debt. A figure above 50 means growth, below 50 a contraction. The bank surveyed 300 purchasing executives. “The sense of doom and gloom was only deepening,” in November, Tatiana Orlova an economist in Moscow at ING Group NV said by telephone. “The mood isn’t getting any better.”
Industrial production has slumped and unemployment is rising as declining commodities prices and the seizure of credit markets prompt an outflow of capital. Investors withdrew $190 billion from the country since August, BNP Paribas SA estimates, as oil fell below the $70-a-barrel average needed to balance the 2009 budget.
“Driving the rapid contraction of the manufacturing sector in November was a record fall in incoming new work,” the bank said in the statement. New export contracts tumbled because of “fallout from the global financial crisis.”
The ruble, which the central bank manages against a basket of dollars and euros, weakened 0.1 percent to 27.9438 per dollar by 11:11 a.m. in Moscow, from 27.9231 on Nov. 28. Against the euro, it was little changed at 35.4468, from 35.4379. The benchmark Micex stock index, fell 0.21 percent to 610.04 at 11:12 a.m.
Russian economic growth, which Prime Minister Vladimir Putin touted as a major achievement before stepping down as president in May after eight years, will slow to 3 percent next year from an average of 7 percent a year since 1999, the World Bank estimates. The economy grew 8.1 percent in 2007.
Adding to evidence that recessions in the U.S., Europe and Japan are dragging down the world’s fastest-growing economies, China’s manufacturing also shrank by the most on record in November as export orders plunged.
OAO Severstal, Russia’s largest steelmaker, shut down a blast furnace that supplied 13 percent of the pig iron produced at its main Russian factory because of its age and as global steel demand weakens, the company said on Nov. 28.
Industrial production in October grew at the slowest annual pace since the Federal Statistics Service changed its methodology at the start of 2003, according to revised data. Unemployment rose to 6.1 percent from 5.3 percent in September.
“Sharp falls in output were also accompanied by a substantial decline in employment,” said Dmitri Fedotkin, an economist at VTB Research, in the report.
OAO Magnitogorsk Iron & Steel, the third-largest Russian steel company, and OAO Razgulay Group, a Russian grain and sugar producer, have said they will shed staff and may decrease wages for some remaining workers.
“What began as a financial crisis became an economic one before our eyes,” Putin said at the Nov. 20 congress of his United Russia party in Moscow.
About 1,070 Russian companies have already announced plans to cut approximately 45,000 jobs, Rossiyskaya Gazeta, the government’s official newspaper, said on Nov. 14, citing the Health and Social Development Ministry’s estimates. The reductions have affected the finance and automobile industries, construction and tourism companies and some manufacturing workers, the paper said.
“The economic pain is shifting to the man on the street,” said Maxim Oreshkin, head of research at OAO Rosbank, in a telephone interview. Oreshkin said he expected the consumer sector would contract in the first quarter of 2009 as the impact of layoffs works its way into consumer spending.
In November, prices that manufacturers pay declined for the first time in a decade, while the prices they charge dropped for the first time in the survey’s history.
“Reflecting the rapid deterioration in the activity profile and weakening commodity prices, inflationary pressures eased significantly,” Fedotkin said.
The annual inflation rate reached 14.2 percent last month, compared with the government’s official year-end forecast of 11.8 percent.
The PMI is derived from indexes which measure changes in output, orders, employment, suppliers’ delivery times and stocks, according to VTB.