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Russian factory activity shrinks in Dec for first time in 6 months: PMI

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Russia's manufacturing sector shrank in December for the first time in six months, hurt by a fall in new orders linked to financing difficulties and doubts over the rouble's exchange rate, a survey showed on Monday.

[MOSCOW] Russia's manufacturing sector shrank in December for the first time in six months, hurt by a fall in new orders linked to financing difficulties and doubts over the rouble's exchange rate, a survey showed on Monday.

Inflationary pressure rose at the fastest rate in more than a decade as a result of the tumble in the value of the rouble due to falling oil prices and Western sanctions that limited access to foreign capital and put the economy on the brink of recession.

The HSBC purchasing managers' index for the manufacturing sector, which accounts for about 16 per cent of the economy, fell to 48.9 in December from 51.7 in November, slipping below the 50 mark denoting expansion for the first time since June. "The consumer goods sector was hit the hardest, seeing falls in demand and output amidst still rising inventories of finished goods," said Alexander Morozov, chief economist for Russia and CIS at HSBC. "This sector has been the key manufacturing driver in the past few years. Now it has become the underperformer."

Output prices rose at the fastest rate since the PMI series began in 2003, and input prices rose at the strongest rate in more than 16 years, the latter linked to the near-halving in value of the rouble against the dollar this year.

Morozov said the fast rise in prices points to the continuing escalation of inflation risks in the economy. "The rouble plunge is to be blamed for that. We foresee double-digit consumer price growth for most of 2015."

REUTERS