Activity in Russia’s manufacturing sector remained steady in November, with new export orders showing a decline for the first time since July, according to a recent survey. The S&P Global Purchasing Managers’ Index (PMI) for manufacturing held at 53.8, maintaining the same level as October and staying above the threshold of 50 that separates expansion from contraction. This reading represents the second-highest since January 2017.
Despite the drop in exports, new orders continued to expand sharply, supporting further growth in output, employment, and purchasing activity, according to S&P Global. However, the growth in demand seemed to be mainly focused on domestic customers, as new export orders decreased for the first time in four months.
Russia has been heavily investing in manufacturing, particularly in the defense sector, in response to its invasion of Ukraine in February 2022. The growth in the sector over the past 21 months has predominantly relied on domestic demand.
Firms in the manufacturing sector are facing challenges related to inflation and logistical issues. Higher supplier charges and currency weakness have led to increased costs in November. S&P Global noted that logistical problems have been persisting for the past four years, hampering manufacturers’ efforts to secure inputs.
Despite these challenges, expectations for future output remain positive. New order growth and import substitution are seen as factors supporting this optimistic outlook, according to S&P Global.
As Russia’s manufacturing sector experiences stability in overall growth, the decline in new export orders raises questions about the country’s ability to sustain its manufacturing expansion. The potential impacts of inflation, logistical difficulties, and a reliance on domestic demand could pose challenges for the sector in the months ahead.
This news comes amidst Russia’s ongoing efforts to bolster its manufacturing capabilities and meet the demands of a changing global landscape. It highlights the importance of addressing supply chain issues and diversifying export markets to ensure sustained growth and resilience in Russia’s manufacturing sector.
