Russia’s Manufacturing PMI improves further in February

Russia’s Manufacturing PMI improves further in February
Russia's PMI manufacturing index is starting to recover and is back in the black while the services index is still in the red but rising. / bne IntelliNews
By bne IntelliNews March 1, 2023

Russian manufacturing firms indicated a further improvement in operating conditions in February, with the rate of expansion being the fastest since early-2017, according to the latest PMI reports from S&P Global. (chart)

As followed by bne IntelliNews, despite the fallout from Russia's full-scale military invasion of Ukraine, the manufacturing sector ended 2022 with a historically strong expansion in output. Manufacturing PMI in January 2023 continued to trend in positive territory.

In February too, the seasonally adjusted S&P Global Russia Manufacturing Purchasing Managers’ Index (PMI) posted 53.6 in February, up from 52.6 in January and above the 50.0 no-change mark indicating expansion. 

“The latest data signalled a solid improvement in the health of the Russian manufacturing sector, and one that was the most marked in just over six years. The upturn extended the current sequence of growth to ten months,” the report commented.

However, the PMI reports do not provide breakdown of the data based on specific sectors. Previously the breakdown of the industrial output in January confirmed that the industry is indeed increasingly dependent on Russia’s war effort in Ukraine.

In February, manufacturing was supported by sharper expansions in production and new sales, again mostly from the domestic market. This led to another strong round of input buying as “firms sought to build stocks of purchases ahead of anticipated rises in client demand” and the consequent accumulation of inventories.

Monitored Russian manufacturing firms said that the upturn in orders was linked to import substitution and a further expansion in new orders.

On the price front, input costs increased further in February, with the rate of inflation accelerating. The pace of increase in input prices was sharp and the fastest since May 2022 due to hikes in supplier charges and unfavourable exchange rate movements.

Manufacturing producers maintained upbeat output expectations for the year ahead on hopes of further upticks in client demand and expansion of the customer base. Still, “although still above the series average, the degree of positive sentiment fell notably from January's near four-year high,” S&P report notes.

Later this week S&P will also publish the Services PMI and the Composite Output (services and manufacturing) indices. While throughout 2022 a wide gap persisted between the strong manufacturing and poor Services PMI performance, in January 2023 services started to catch up with manufacturing, posting only marginal contraction.