Strong 2022 ending for Russian manufacturing PMI, services remain weak

Strong 2022 ending for Russian manufacturing PMI, services remain weak
Russia's manufacturing PMI was still expanding in December, although it slipped slightly from November's strong result, but the contraction in services continued as sanctions weigh on the economy. / bne IntelliNews
By bne IntelliNews January 1, 2023

The Russian manufacturing sector ended 2022 with a historically strong expansion in output, with the rate of December’s growth easing only slightly from November's 27-month high, according to the latest Russia Manufacturing Purchasing Managers' Index (PMI) report from S&P Global. (chart)

The seasonally adjusted S&P Global Russia Manufacturing PMI posted 53.0 at the end of 2022, down only slightly from 53.2 in November, and above the 50.0 no-change mark, indicating expansion.

“The latest data indicated a solid upturn in operating conditions across the Russian manufacturing sector, and one that was the second-sharpest since January 2017,” the report commented.

The headline figure was supported by a further expansion in output at Russian manufacturers, with higher production levels linked to another monthly upturn in new orders and the acquisition of new customers.

Supporting the rise in output was a further increase in domestic client demand during December, as foreign client demand fell again due to the impact of sanctions.

“Capacity pressures were also evident as Russian manufacturers recorded back-to-back expansions in work-in-hand. Although only marginal, the rate of growth in backlogs of work was the steepest since January,” the PMI report noted.

At the same time, output expectations strengthened in December as Russian manufacturers registered the second-strongest degree of confidence in outlook since March 2019. The optimism was driven by stronger client demand and investment in new products.

Despite the historically strong expansion in the manufacturing sector and output and manufacturing PMI performance in the end of 2022, weak services continued to compromise overall composite output in Russia in December 2022.

The persistent widening gap between the manufacturing and services performance could be an indication that demand is mainly state supported, in particular by the needs of Russia’s full-scale invasion of Ukraine.

The seasonally adjusted S&P Global Russia Services PMI Business Activity Index registered 45.9 in December, down from 48.3 in November, and below the 50.0 no-change mark, signalling a strong decrease in Russian service sector output, according to the latest Services and Composite PMI report by S&P Global.

December’s decline in services activity was the third in as many months and the second-fastest since April. As a result, the S&P Global Russia Composite PMI Output Index posted 48.0 in December, down from 50.0 in November, also indicating contraction.