The Russian manufacturing sector continued to expand in December 2023, showing the strongest improvement rate in almost seven years, according to the latest PMI report from S&P Global. At the same time Services PMI also remained in the growth territory in the reporting month. (chart)

As followed by bne IntelliNews, despite the fallout from Russia's full-scale military invasion of Ukraine, the manufacturing sector ended 2022 with a historically strong expansion in output. Manufacturing PMI since January 2023 continued to trend in positive territory.

The seasonally adjusted S&P Global Russia Manufacturing Purchasing Managers’ Index (PMI) posted 54.6 in December, up from 53.8 in November and above the 50.0 no-change mark to signal a “solid improvement in the health of the manufacturing sector” and showing the strongest rate of growth was since January 2017.

The seasonally adjusted S&P Global Russia Services PMI Business Activity Index registered 56.2 in December, up notably from 52.2 in November. The rise in service activity was “steep overall and accelerated to the sharpest since August”, according to the report. 

As a result, The S&P Global Russia Composite PMI Output Index (both services and manufacturing) posted 55.7 points in December, up from 52.4 in November, to signal the sharpest expansion in business activity for four months.

In Manufacturing, sustained improvements in output and new order growth supported the sector. “A further sharp rise in new sales spurred firms to expand input buying and employment at increased rates, as optimism in future output was buoyed by a sustained rise in client demand,” S&P wrote. Greater client demand continued to be largely focused on the domestic market.

Although cost burdens in manufacturing continued to increase at a marked pace, the rate of inflation slowed to the weakest in six months. 

“Russian manufacturing firms remained strongly optimistic regarding an increase in output over the coming 12 months. Confidence stemmed from planned investment in new products and machinery. The level of positive sentiment was historically elevated despite dropping to a three-month low,” according to the report.

Service providers also commented that greater output stemmed from strong demand conditions and a faster upturn in new business.

Amid stronger domestic and foreign client demand Russian service providers expanded output and workforce numbers at the fastest pace for six months in a bid to relieve pressure on capacity and process incoming new work.

“Anecdotal evidence stated that increased new business was due to the introduction of new service lines, new client acquisitions and improved demand conditions,” according to S&P.

In the same time, input prices for Russian service providers “increased at a substantial pace in December”, with higher costs attributed to greater supplier and utility prices, as well as an uptick in wage bills. 

For service provides, positive outlook in December 2023 was linked to hopes of further growth in new business and investment in advertising. “Although firms remained strongly optimistic regarding the outlook for output over the coming year, the degree of confidence slipped to a four-month low in December,” according to the report.