The seasonally adjusted S&P Global Russia Manufacturing Purchasing Managers’ Index (PMI) posted 53.6 in July, down from 54.9 at the end of the second quarter, but well ahead of the 50 no-change benchmark, to signal a solid but softer upturn in manufacturing sector as the economy starts to come off the boil. (chart)

Russia's manufacturing sector continued to grow at the start of the third quarter of 2024, according to the latest PMI data from S&P Global. The sector's health, however, showed the slowest improvement in six months, as both production and new orders decelerated.

New order inflows continued to rise, extending the growth trend that began in June 2022, though the pace was the slowest in a year. Weaker demand from key export markets led to a renewed decline in new export orders, the steepest since April. This slowdown prompted firms to moderate their employment and input purchasing expansion. Despite these challenges, business confidence remained historically high, driven by investments in new machinery and product development, and expectations of improved demand conditions.

Cost pressures intensified, with average cost burdens rising at the fastest rate since October 2023, driven by higher raw material, transportation, and supplier costs, as well as unfavourable exchange rate movements. Although companies raised selling prices in response, the rate of charge inflation was lower than in June but still above the historic average.

Vendor performance worsened, with supplier delivery times lengthening to the greatest extent in ten months. This, combined with efforts to build stockpiles amid uncertain material supplies, led to contractions in pre- and post-production inventories. The pace of inventory depletion for finished goods was the fastest since November 2023. Despite these challenges, Russian manufacturers maintained a positive outlook for the coming 12 months.