The seasonally adjusted S&P Global Russia Manufacturing Purchasing Managers’ Index (PMI) was up slightly in June to 54.9, up from 54.4 in May, as Russia’s productive sector enjoyed the fastest pace of growth in three months, thanks to the ongoing war spending. (chart)

Russia is currently enjoying the fast growth in its manufacturing PMI in Europe, where many of the leading economies are seeing their PMIs contract, posting index results at below the 50 no-change benchmark.

“Operating conditions improved at a strong rate, amid steep increases in output and new orders. Meanwhile, sustained demand conditions encouraged firms to take on additional staff, as employment rose at the fastest rate on record,” S&P Global said in a press release on July 1. “Companies also stepped up their input buying, as some looked to build safety stocks as business confidence ticked higher.”

Inflation remains the fly in the ointment with input prices rising at the fastest pace since November 2023, but accommodative demand conditions allowed firms to raise their selling prices at a sharper rate.

And demand remains strong as the economy is running very hot, thanks to the war in Ukraine. Russian goods producers continued to register a sharp expansion in new orders midway through the year, with the pace of growth quickening. S&P Global’s panellists often stated that greater new sales were linked to sustained demand conditions and new client wins.

Moreover, foreign customer demand improved in June, as new export orders returned to growth for the first time in three months, as Russia reorientates is trade to the Global South where it has many willing customers.

“Production rose at a steep pace amid a stronger expansion in new orders. Moreover, the pace of increase in output was among the fastest in seven-and-a-half years,” S&P Global reports.

Employment growth was in part to alleviate pressure on capacity, with manufacturers registering a renewed decline in backlogs of work in June. The fall was the first in four months and modest overall.

Ongoing logistics issues and higher transportation and supplier prices reportedly drove cost inflation midway through 2024. Input prices rose at the sharpest rate since November 2023, with the increase in operating expenses substantial in the context of the series' history.

“Input buying increased at the fastest pace for six months in June. Greater new orders and efforts to replenish used stocks reportedly supported the steeper upturn. The pace of growth was well above the long-run series average,” S&P Global said.

Despite efforts to rebuild stocks, both pre- and postproduction inventories declined at the end of the second quarter. Stocks of finished goods contracted at the quickest rate in four months, as current holdings of items were used to fulfil orders.

Finally, Russian manufacturers were confident of an increase in output over the coming year, as the degree of confidence reached the highest in three months, according to S&P Global. “Companies were buoyed by planned investment in new product development and outreach to new clients,” the agency said.