Coupled with its shift from buying Treasuries to strategic metals, this all bodes quite well for Russia too.

March IP came in at -13.7% y-on-y. It grew by 11.1% compared to Feb, but it turned out to be a slower rate of growth than in 2008. Considering that March is 10.7% longer than Feb, IP stayed virtually flat.

But at least it’s not shrinking anymore.

If this is the end of the crisis, then the recovery is shaping up to be L-like. Not the best scenario.

If the same IP reading of -13.2% y-on-y remains in effect until Sep, it will at least mean that the real economy is once again growing at the rate it was in 2008, and will reach pre-crisis level in Nov or Dec. If it goes higher, that would imply a rate of growth higher than in 2008. E.g., Jan to Feb growth in 2009 was higher than that in 2008 (even if because of a really low base in Jan due to numerous factors).

Unless more external shocks are still in store, of course…

Very high correlation between PMI and PMI-based QoQ GDP indicator, as well as YoY GDP indicator but lagging but lagging by 3 months. Fairly high correlation between PMI-based YoY GDP indicator, and real GDP – see this graph. Currently only estimate of Q1 growth was -7.0% by deputy Economy Minister Klepach, which is significantly below what ought to be as indicated by PMI (i.e. around -5%) – that said, during the H2 1998 recession real output fell by -9% for half a year, whereas PMI indicated a trough of around -5%. So even if the recession is V shaped – recovers in H2 as Ed believes above (and I agree), we could still see pretty bad overall annual growth (perhaps -4% or -5%) if it turns out that the real downturn in Q1 and Q2 is around -6% or -7%.

It is April 5th, and we know that oil price is already way above the low $40s that the RF government was basing the budget on.

I am encouraged by your demographic analysis during this crisis. It sounds counter intuitive.

1. PMI tends to lead official YoY% growth by 2 months.

2. VTB – Russian GDP Indicator signaled ongoing economic contraction in February.

Data Summary
All Industry GDP GDP
Index Indicator Indicator
(50.0 = no change)_ Y/Y% Q/Q%
Mar 58.8 6.6 1.7
2008
Apr 57.9 6.7 1.6
May 59.2 6.9 1.8
Jun 59.0 7.4 1.8
Jul 57.5 7.3 1.6
Aug 54.7 6.8 1.3
Sep 54.6 6.5 1.3
Oct 48.0 5.2 0.6
Nov 36.5 2.6 -0.6
Dec 32.0 -0.3 -1.0
2009 Jan 32.1 -2.9 -1.0
Feb 38.8 -4.7 -0.3

3. I think the main issue now is what we’re going to see after the October-Jan collapse – a V or U, or an L.

Recently the World Bank estimated 2009 growth at -4.5% and the OECD at -5.6%. They believe it will be an L, because it is a global crisis and the thinking goes Russia will not be able to export itself out of it as in 1998 (when it was a V shaped collapse with rapid recovery, but output fell by -5.3% then).

http://www.businessneweurope.eu/blobs/99953/0309_Russia_Macro_PMI_GDP_Feb09.gif

Anyhow, I think it now depends on the external situation. If Russia could attract credit again and if oil prices begin to rise again (incipient signs of both happening), then it will be more like a U, which means growth would be at perhaps around -3% to -2% like the government is now predicting (-2.2%). If not, we’ll plateau and decline by around -5% as predicted by WB / OECD.

4. The figures here (GPD growth for 2008 breakdown) might be important, but it’s late now and I’m too tired to think about it. Let me know what you make of this.

Or maybe, like I mentioned, it’s the slope of the PMI that’s more predictive of y-on-y IP direction. Like in this graph: http://www.markiteconomics.com/images/MarkitEurozone.gif

Anyway, let’s wait for a couple of weeks for IP figures to come out. Although econometrics are fun!

PMI refers to change compared to the previous month. The reason Feb was better than Jan, was presumably because in Jan many manufacturers simply extended their holidays instead of formally decreasing output.

——————

An indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries, and the employment environment.

Investopedia Says:
A PMI of more than 50 represents expansion of the manufacturing sector, compared to the previous month. A reading under 50 represents a contraction, while a reading at 50 indicates no change.