Manufacturing Sector in Russia

(Reuters) – Activity in Russia's manufacturing sector contracted for the first time in more than two years in September, according to a business survey.

Driven by declines in output levels, new orders, and employment, the S&P Global Purchasing Managers' Index (PMI) for Russian manufacturing fell to 49.5 from 52.1 in August. This marks the first time it has moved below the 50 level, separating expansion from contraction, since April 2022.

S&P Global noted, "The decrease in production was linked to subdued demand conditions and supplier delivery delays which led to input shortages and hampered output."

Despite these challenges, Russia's significant spending on military equipment and weapons since its invasion of Ukraine in February 2022 has buoyed the manufacturing sector, which might otherwise have suffered due to some countries shunning Moscow.

Russian manufacturers have gradually found new export markets, with the pace of new export order growth quickening in September, reportedly due to stronger demand from Central Asia, according to S&P Global.

The survey indicated that supply chain problems and labor shortages have become more pronounced. Some firms highlighted a lack of skilled candidates for job vacancies. S&P Global explained, "Supply chain issues including delays to rail transportation and international logistics led to a sharp deterioration in vendor performance in September."

Expectations for future output remained elevated, although they eased to their lowest since February 2023. "Optimism was due to hopes of stronger demand conditions and planned investment in new products and expansion in production facilities," S&P Global added.