Russia’s manufacturing sector expanded at its fastest pace in six months in January, driven by a surge in domestic demand and a rise in new orders, according to the latest S&P Global Russia Manufacturing Purchasing Managers’ Index (PMI) data. (chart)

The seasonally adjusted PMI rose to 53.1, up from 50.8 in December, marking the strongest improvement in operating conditions since July 2024.

The report signals continued resilience in Russia’s goods-producing sector, with output expanding for the third consecutive month and at the fastest rate since June 2024. Stronger demand conditions supported employment growth, which accelerated to its sharpest pace in six months. However, new export orders fell for the first time in half a year, indicating that growth remains domestically driven.

New orders surged at the sharpest pace in seven months, supported by competitive pricing and an accommodative sales environment. The data pointed to a solid decline in export sales, the steepest since February 2024, suggesting Russian manufacturers are increasingly reliant on domestic consumption.

Despite continued supply chain disruptions, firms reported some success in building input safety stocks, contributing to the first expansion in stocks of purchases since November 2023. Supplier performance, however, remained weak, with vendor lead times deteriorating for over five years due to logistics and transportation delays.

While input cost inflation eased to a three-month low, it remained historically high, driven by rising supplier, material, fuel and transportation costs. According to the report, manufacturers passed on higher costs to customers, with selling prices rising at their second-fastest pace since October 2023.

“An upbeat sales environment enabled firms to pass through greater costs to customers,” the report stated.

In response to growing demand, manufacturers expanded their workforce numbers in January, reversing two months of job losses. While employment gains were marginal, they represented the strongest growth in six months. Backlogs of work also increased, reflecting capacity pressures following the influx of new orders.

Despite challenges, business confidence strengthened, with firms citing planned investments in machinery, product development and expectations of sustained customer demand. Optimism levels remained historically elevated, pointing to continued expansion in the sector.