Moscow, Russia – Russia’s manufacturing sector continued to shrink in October, with new orders falling at their fastest rate in three months, according to a survey by S&P Global published Saturday. The Purchasing Managers’ Index (PMI) for the sector dropped to 48.0, down from 48.2 in September, marking the steepest decline since July. Any PMI reading below 50 indicates contraction in activity.

The downturn was largely driven by weak domestic demand, as firms cut employment and scaled back input purchases to manage rising costs. Business confidence also dropped to its lowest level since May 2022, reflecting growing concerns over financial difficulties faced by customers and uncertainty in the Russian market.

Despite the overall contraction, there were bright spots in export markets. New export orders returned to growth after two months of decline, fueled by improved demand in existing overseas markets. This trend provides some relief for Russian manufacturers heavily reliant on foreign clients amid domestic weakness.

Cost Pressures and Pricing Adjustments

Input costs rose at the joint-slowest pace since February 2009, aided by lower metal prices, easing some financial pressure on manufacturers. In response to weak domestic demand, firms reduced output charges for only the second time in three years, aiming to attract new customers and retain existing ones.

Supplier delivery times also improved slightly, marking the greatest improvement since November 2019, as subdued demand for raw materials reduced capacity pressures.

Implications for the Russian Economy

The latest PMI data highlights ongoing challenges for the Russian manufacturing sector, including:

• Subdued domestic demand suppressing industrial production
• Rising financial stress among customers impacting new orders
• Moderate relief from easing input cost inflation
• Stabilization in export orders offering a partial offset

Overall, the contraction underscores the fragile state of Russia’s manufacturing industry, which is navigating a mix of internal financial strains and external market opportunities. Analysts suggest that sustained support for exporters and cautious domestic investment will be critical to stabilizing growth in the sector over the coming months.