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. Last Updated: 07/27/2016

Expansion on the Horizon as Purchasing Managers' Index Rises

RusAl / BloombergManufacturers saw input costs rise at the fastest pace since July 2008, including on metals, energy and transport.

Manufacturing growth jumped in April to the highest level in almost two years as orders rose and companies resumed hiring, VTB Capital said Tuesday.

The Purchasing Managers’ Index rose to 52.1 last month, from 50.2 in March, the bank said in an e-mailed statement. The index, based on a survey of 300 purchasing executives, signals expansion when it rises above 50.

“The overall improvement in business conditions was the strongest in nearly two years, driven by higher new orders, rising output and a resumption of employment growth,” said VTB Capital, a unit of Russia’s second-largest bank. “Exports were a key source of new order growth, registering the fastest increase in over two years.”

Companies including Chelyabinsk Zinc, Russia’s largest producer of the metal, and carmaker AvtoVAZ are boosting production as prices rise, global sales improve and domestic demand accelerates. Gross domestic product may expand as much as 4 percent this year, after contracting a record 7.9 percent in 2009, the Economic Development Ministry estimates.

“Robust recovery of the manufacturing sector as well as signs of rising inflationary pressures in the economy support the view that the current monetary easing cycle by the Central Bank is over for now, which we see as a positive development for the ruble,” said Vladimir Osakovsky, an economist at UniCredit.

The Central Bank last week cut its benchmark interest rate for the 13th time in a year to a record-low 8 percent, warning that inflationary pressures in the second half may rule out further cuts.

Manufacturing employment increased last month, ending a period of job cutting that lasted almost two years, the longest stretch in the survey’s history, according to VTB Capital. The unemployment rate was unchanged at 8.6 percent in March after falling in February.

Manufacturers saw input costs increase last month at the fastest pace since July 2008, chiefly on metals, energy, transport and oil-related products, leading to the most rapid growth in producer prices since August 2008, VTB Capital said.

Industrial production rose at a faster pace in March than the previous month, advancing an annual 5.7 percent after a 1.9 percent gain in February, the State Statistics Service said April 15. Output may expand 2.5 percent this year, according to the Economic Development Ministry.