Activity Across Russia’s Manufacturing Sector Inches Up in November
According to a business survey released on Monday, activity in Russia’s manufacturing sector edged up in November due to increased outputs and new orders, despite a depletion in work backlogs and cuts in workforce numbers.
The S&P Global Purchasing Managers’ Index (PMI) for Russian manufacturing rose to 51.3 in November, exceeding the 50-level threshold that separates expansion from contraction. The uptick was attributed to a renewed increase in new sales, which ended a two-month decline, as demand conditions improved, albeit at a slower pace than the series average.
Russia’s significant military equipment and weapons production, prompted by its invasion of Ukraine in February 2022, has helped buoy the manufacturing sector, which has otherwise been affected by global sanctions. Manufacturers have started to find new markets overseas, with new export orders rising for the fourth consecutive month, albeit at a slower pace than in October.
However, employment continued to decline, with manufacturers struggling to replace voluntary leavers due to staff shortages. Unemployment in Russia dropped to a record low of 2.3% last week, exacerbated by widespread labor shortages affecting all areas of the economy.
Firms are also concerned about the rouble, which tumbled to its weakest since March 2022 last week, leading the central bank to intervene with increased foreign exchange sales. Higher supplier prices and unfavorable exchange rate movements increased costs, according to respondents.
Supply chain issues persisted, with delays in supplier deliveries continuing in November due to rail and logistics routes being key factors behind longer lead times for inputs. Despite these challenges, business confidence increased to its highest since June, driven by optimism about new product development and investment in modernization.