Operating conditions at Russian manufacturing firms improved at a solid pace in October, albeit slower than in September and amid sharp cost inflation pressure, according to the latest report from S&P Global. (chart)

The seasonally adjusted S&P Global Russia Manufacturing Purchasing Managers’ Index (PMI) posted 53.8 in October, above the 53.8 no-change mark indicating expansion, although down slightly from 54.5 in September.

The upturn stemmed from stronger expansions in output and new orders, driven by domestic demand amid only fractional growth in new export orders. The pace of increase in new sales accelerated for the third month running to the sharpest since March 2011. 

“Greater new order inflows were attributed to successful import substitution, the acquisition of new customers and stronger demand conditions,” according to S&P.

Growth in new order inflows led to a renewed rise in backlogs of work in October, with the capacity pressure further pressuring employment. “That said, the rate of job creation eased to the second-slowest in eight months amid challenges finding suitable candidates,” S&P said, confirming reports of acute labour shortages in Russian industry. 

“On the price front, input costs faced by goods producers continued to increase at a marked pace,” the report warned, noting that weak ruble versus the US dollar, higher transportation charges and greater supplier prices pushed up operating expenses.

As covered by bne IntelliNews, the inflation expectations of enterprises continued to rise for the fourth month in a row, in October the indicator added 0.3 percentage points and reached 24.3%.

Indeed, the uptick in cost burdens led to the manufacturing firms registering a marked rise in selling prices, according to the S&P PMI report.

Still, the confidence in the manufacturing sector remained solid, buoyed by stronger demand conditions and output expectations, planned investment in new machinery, product development and capacity expansion.