The Russian manufacturing industry continued to experience decline in April, albeit at a slower rate, as reductions in production and new orders slowed down alongside the most modest increase in input costs since early 2020, according to S&P Global.
The seasonally adjusted S&P Global Russia Manufacturing Purchasing Managers’ Index increased to 49.3 in April from 48.2 in March, suggesting a second consecutive month of worsening operational conditions, while still remaining under the neutral mark of 50.
The recent data indicates that the downturn has become minimal.
“April’s figures reflected an ongoing decrease in production among Russian manufacturers, with the rate of contraction easing to just a minor level,” S&P Global reported.
The decline in production and new sales was attributed to persistently weak demand both domestically and abroad, with firms noting diminished consumer purchasing power and intensified competition as significant obstacles to growth.
Following substantial economic advancements in 2024, the Central Bank and Finance Ministry employed non-monetary policy measures to intentionally moderate the economy in order to tackle persistent high inflation — a cooling period was largely anticipated this year.
Although authorities are striving for a smooth economic transition, there is ongoing debate over whether a flurry of bankruptcies will emerge later this year or if the Russian economy is actually more resilient than it initially appears.
Last week, President Vladimir Putin reassured business leaders and the public that the current slowdown in GDP growth — 1.9% year-on-year for January and February — is a deliberate adjustment aimed at controlling inflation. The Economic Development Ministry reported that GDP growth was 4.3% in the previous year.
“At first glance, these statistics indicate that the Russian economy is reaching its pre-COVID structural limits while allocating substantial resources to the war and issuing large cash payments to contracted soldiers,” analyst Nicholas Trickett noted in a report for Riddle Russia.
Since December, industrial output has been leaning toward stagnation, worsened by diminishing investment in resource extraction, Trickett added.
Finance Minister Anton Siluanov offered a more positive outlook, forecasting that the Russian economy might grow by 1.8% in 2025 under a high-risk scenario, compared to a 2.5% increase in a base case.
For the second consecutive month, total new orders have declined, with new export sales also decreasing, according to S&P Global. However, manufacturers displayed resilience in purchasing, which saw an increase for the first time in three months, albeit slight. Inventories of both pre- and post-production goods kept decreasing as companies made use of stock to maintain current production levels.
Input cost inflation eased for the fifth month in a row, reaching its lowest point since February 2020.
“Favorable currency fluctuations against the dollar have reportedly contributed to the moderation of price increases for imported materials,” S&P Global observed. Price inflation for output also decelerated, marking its slowest rate since January 2023, as firms aimed to set competitive prices and encourage sales.
April saw a reduction in employment within the manufacturing sector, ending a three-month period of job growth.
“The drop in workforce numbers concluded a three-month trend of job creation but was only marginal overall,” the report noted, stating that firms often chose not to replace employees who left voluntarily due to sufficient capacity.
Backlogs of work diminished at the fastest rate in two and a half years, and suppliers’ delivery times stabilized at their most consistent level since November 2019. Several companies reported improved availability of inputs amid decreased demand, while others continued to experience logistical challenges.
Despite the decline in orders and a slight decrease in sentiment from March, Russian manufacturers maintained an optimistic outlook.
“Confidence levels decreased slightly from those observed in March, but remained historically strong,” S&P Global reported, highlighting expectations of increased demand and plans for product expansion.
This article was first published in bne IntelliNews.
