Russia’s PMI continues to accelerate in May

Russia’s PMI continues to accelerate in May
Russia's manufacturing PMI expanded in May, with the rate of output growth accelerating to its fastest since March 2019 / bne IntelliNews
By bne IntelliNews June 2, 2023

The Russian manufacturing sector posted another improvement in May 2023, according to the latest manufacturing PMI reading. (chart)

The seasonally adjusted S&P Global Russia Manufacturing Purchasing Managers’ Index (PMI) posted 53.5 points in May, above the 50.0 no-change mark indicating expansion, signalling a “solid upturn in operating conditions at Russian manufacturing firms”. The latest improvement was the fastest for three months and stronger than the series average, according to the report.

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 since January 2023 has continued to trend in positive territory.

The growth in the sector was supported by faster expansions in output and new orders, with employment rising at its sharpest pace for 22 1/2 years, according to S&P. 

“Output expanded across the Russian manufacturing sector for the tenth month running in May. The upturn in production was strong overall, with the rate of growth accelerating to the joint-fastest since March 2019. Where an increase in output was noted, firms linked this to greater demand conditions and a further uptick in new order inflows,” S&P observes.

The companies took on new customers due to strengthening demand conditions, which was exclusively domestic, as new export orders returned to contraction territory in May.

On the inflation front, Russian goods producers saw a further acceleration in the pace of input cost inflation during May. Hikes in supplier prices and an unfavourable exchange rate were named by respondents as the main reason, with cost burdens rising at the steepest rate for just over a year. Still, as the companies are looking to support sales, they are pricing their goods competitively and are not passing such rises on to consumers.

“Although the degree of confidence among Russian manufacturers slipped in May, firms were upbeat in their expectations for output over the coming year. Planned investment in new products and hopes of further upticks in demand supported optimism,” S&P wrote, noting that the level of positive sentiment was stronger than the series average.