The headline seasonally adjusted IHS Markit Russia Manufacturing PMI posted 51.7 in November, fractionally higher than 51.6 recorded in October, but the upturn was the fastest in six months. Any result above the 50 no-change mark is an expansion.

“Russian manufacturers registered a further marginal improvement in the health of the sector, according to November PMI data. Overall growth was supported by faster upturns in production and new orders, with stronger client demand also driving the steepest rise in employment since late-2018,” Markit said in a note.

“Greater staffing numbers allowed manufacturers to process new sales in a timely manner, with backlogs of work falling at a quicker pace. In line with greater customer demand, firms' expectations regarding the outlook for output over the coming year were revised upwards to their strongest since June,” Markit added.

However, manufacturing is suffering from Russia’s stubbornly high inflation and Markit’s panellists reported that cost burdens rose at their sharpest pace for four months amid a further deterioration in vendor performance.

The pace of inflation accelerated to a four-month high in November for manufacturers. Panellists often stated that higher input costs stemmed from supplier price hikes and raw material shortages.

Although firms passed on greater cost burdens to clients through a sharp rise in selling prices, the rate of charge inflation softened in November. With the exception of September's recent low, the pace of increase was the slowest for a year.

Russia’s consumer price inflation (CPI) was 4.6% in November and its producer price index of inflation (PPI) a higher 13.7%, which is still rising.  

Contributing to the overall expansion was a modest rise in production. The rate of output growth was the steepest since May, albeit subdued in the context of the series history, Markit reports.

“Increases in production were linked by panellists to stronger client demand and another rise in new order inflows,” Markit said.

Russian goods producers recorded a marginal uptick in new orders in November. Alongside more favourable demand conditions, firms also noted that access to new markets boosted total new sales, Markit reports.

“Although slower than the long-run series average, the rate of expansion was the sharpest for six months. Meanwhile, November data signalled an end to a five-month sequence of decline in new export orders,” says Markit.

The recovery in demand also allowed firms to hire new workers in November as unemployment continued to fall back to the historically low levels it was enjoying before the coronavirus (COVID-19) pandemic hit last year. The rate of job creation in November amongst Russian manufacturers was the fastest since December 2018, according to Markit, and backlogs fell as a result.

Russian firms also stepped up their purchasing activity in November. Input buying rose at a solid pace that was the fastest since March 2019. Nevertheless, material shortages resulted in further depletions in stocks of purchases and finished goods. The decline in the latter was the quickest since April as firms reportedly sold directly from stock.

Business confidence across the Russian manufacturing sector ticked higher to its greatest extent for five months midway through the fourth quarter.