Activity in Russia's manufacturing industry scaled up at its fastest pace in almost seven years in December, according to the latest S&P Global Purchasing Managers' Index (PMI) data. 

(Photo : ALEXANDER NEMENOV/AFP via Getty Images)
A worker does welding on a part of a RITM-200 nuclear reactor, the latest reactor for the icebreaker fleet, at ZiO-Podolsk Machine-Building Plant, an enterprise of Russia's nuclear agency Rosatom machine-building unit, in the town of Podolsk in the Moscow region on December 5, 2023.

Factory Activity in Russia Expands at Fastest Pace

According to Reuters, the S&P Global PMI for manufacturing jumped to 54.6 in December from 53.8 in November, moving above the 50-point mark that set apart expansion from contraction. It was reportedly the highest reading since January 2017, with output increasing at its fastest pace in seven months.

"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."

Russia's factory activity surge was reportedly due to the huge domestic demand following its invasion of Ukraine in February 2022. The country is spending enormously on manufacturing, pouring money into the defense sector to ramp up military production.

READ ALSO: Russia Lacks Nearly 5 Million Workers This Year as Ukraine War Drains Its Labor Force: Report  

Manufacturers in Russia Face Challenges

Despite the positive momentum, manufacturers are still facing various challenges, such as logistical disruptions due to Western sanctions and the elevated costs of imported goods, exacerbated by the weak ruble and soaring inflation. However, S&P Global said the survey showed a softening in the inflation rate.

Interestingly, amid labor shortages in Russia and an unemployment rate at a historic low of 2.9%, S&P Global noted that companies opted to increase staffing levels in an effort to address backlogs of work. S&P Global said the overall outlook remains optimistic, with firms expressing confidence in the future.

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

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