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Bank Rossii Eases Further As Russia's Economy Contracts At A Record Rate

The ECB's Balance Sheet At A Glance.

Monday, June 2, 2008

Russia Manufacturing PMI May 2008

Russian manufacturing expanded in May at the slowest pace since last September amid accelerating inflation according to the VTB Bank Europe's Purchasing Managers' Index, which fell to 52.4 from 53 in April, the lowest since it reached 52.2 in September. A figure above 50 indicates growth, below 50 a contraction. The bank surveyed 300 purchasing executives.

``Growth in new orders and output weakened on the back of softening domestic demand, together with a sharper decline in export orders,'' Dmitry Fedotkin, an economist at VTB in Moscow, said in the statement. ``Inflationary pressures eased only marginally,'' he added.

Imports account for an estimated 49 percent of the local retail market, highlighting the need to boost domestic production, former Prime Minister Viktor Zubkov said in April. Russia is struggling to slow inflation to 10 percent this year as food and energy prices rise. The rate rose to 14.3 percent in April, the highest since in five years.

The IMF warned today that Russian inflation may accelerate to 14 percent this year and that the risk of the economy overheating is mounting.

Consumer prices rose an annual 14.3 percent in April, a five- year high, stoked by global food price increases and rising domestic wages. The economy grew 8 percent in the first quarter, the Economy Ministry said in a preliminary estimate on April 17. Gross domestic product rose 8.1 percent for all of 2007.

``The risk is that inflation gradually increases to such a level that it requires a sharp tightening of monetary policy that could cause a slowdown in growth,'' Poul Thomsen, head of the IMF mission in Russia, told reporters in Moscow today. The risk of the economy ``overheating'' is increasing, he said

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