New survey data out of Russia confirms that the country’s economy is in trouble.
Russia’s HSBC composite output index fell to 47.6 in November, down from 49.1 in October, which was the sharpest fall in activity since May. This was the sixth time in 2014 that Russia saw a negative reading.
A PMI above 50 signals growth, while a number below 50 signals a contraction.
“The PMI survey found the Russian economy risking not only prolonged, but deep recession. We expect 1.5% GDP decline in 2015, but are prepared to see even deeper decline if current negative trends by the PMI survey continue,” writes Alexander Morozov, the Chief Economist of Russia, CIS and the Baltics at HSBC.
Morozov’s projection is much worse than the 0.8% GDP decline forecast by the Russian economy ministry earlier this week.
The HSBC Services Business Activity Index fell to 44.5 in November — a five and a half year low. Additionally, for the first time in six years the majority of services firms expect activity to decline (as opposed to growth) over the next 12 months.
Services “are so-called nontradable sectors. They do not win from currency depreciation, but lose from a faster price growth that accompanies the depreciation and erodes wages, incomes and profits,” Morozov.
And right now, Russia’s currency is depreciating like crazy. The ruble continues to plunge to new lows (currently around 53 to 1 dollar) — which could mean bad news in the future.
Here’s how much the ruble tanked against the dollar over the last several months:
Additionally, employment in the private sector decline for the 17th month in a row, and the “rate of job shedding accelerated to the fastest rate since September 2009,” according to the report.
The only sort of positive-looking number — manufacturing output, which rose at the strongest rate since July — is actually bad news, too.
In the current circumstances, “manufacturing is a poor indicator of the overall trend in the Russian economy, especially if we account for the continuing decline in export demand for manufactured goods that once again prove to be inelastic to exchange rate movements,” writes Morozov.
So all in all, things aren’t looking good.