December had the greatest pace of expansion in Russia’s manufacturing sector in about seven years, according to a business survey released on Friday. Despite this, new export orders fell for the second consecutive month.

The S&P Global Purchasing Managers’ Index (PMI) for manufacturing increased from 53.8 in November to 54.6 in December, closing the gap between expansion and contraction at 50 points. The reading was at its highest point since January 2017.

Production surged at the quickest rate in seven months, and new orders also saw a significant uptick.

“Greater client demand was largely focused on the domestic market, however, as new export orders fell for the second month running,” S&P Global said in a statement.

“Fewer customer requests from clients in key export markets led to the fastest fall in new business from abroad since July.”

Moscow is investing a lot of money in the defence industry and manufacturing to increase military output in the wake of its invasion of Ukraine in February 2022. In the nearly two years that have passed since then, domestic demand has been a major factor in the sector’s growth.

Amidst the weak rouble and rising inflation, manufacturers are facing significant logistical challenges as a result of Western sanctions and the high cost of imported goods. According to S&P Global, the poll indicated that the rate of inflation was declining.

S&P Global reported that despite labour shortages in Russia, where unemployment is at a record low 2.9%, businesses have raised staffing levels in an attempt to clear backlogs of work, but they are still hopeful about the future.

“Confidence stemmed from planned investment in new products and machinery,” S&P Global said. “The level of positive sentiment was historically elevated despite dropping to a three-month low.”

(Adapted from FirstPost.com)

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