Russia's Manufacturing Sector Shows Signs of Recovery in October

(Reuters) – Activity in Russia's manufacturing sector returned to expansion in October, recovering from its first slide into contraction in more than two years, according to a business survey released on Friday. The recovery was boosted by a sharp increase in new export orders.

The S&P Global Purchasing Managers' Index (PMI) for Russian manufacturing rose to 50.6 from 49.5 in September, moving back above the 50.0 threshold that separates expansion from contraction.

Despite this uptick, output and new orders continued to contract, albeit at a slower pace. Manufacturers cited muted customer demand as a reason for the decline, although the contraction in new sales was only fractional, according to S&P Global.

Russia's significant spending on military equipment and weapons since its invasion of Ukraine in February 2022 has supported a manufacturing sector that might have otherwise struggled as many countries distanced themselves from Moscow.

Gradually, Russian manufacturers have discovered new export markets, and the growth pace of new export orders quickened to its fastest rate since January 2008, the survey revealed.

"Demand conditions reportedly strengthened in neighboring countries, which drove interest in Russian goods," S&P Global noted.

Input costs and output charges rose sharply, driven by higher supplier and transportation prices, coupled with unfavorable exchange rates.

As stated by S&P Global, "supplier performance at Russian manufacturers deteriorated in October," with delays linked to logistics issues, especially in shipping and rail transportation.

In October, a renewed rise in employment was noted, with firms optimistic about stronger future demand, new product development, and investment in capacity and automation, according to S&P Global.