(Reuters) – Activity in Russian manufacturing grew in October as new orders increased at their fastest pace in more than 12-1/2 years, a business survey showed on Wednesday, while pressure on firms to expand production capacity continued.
The S&P Global Purchasing Managers’ Index (PMI) for manufacturing eased to 53.8 in October from 54.5 in September, but stayed above the 50 mark that separates expansion from contraction. It was the second-highest reading since January 2017.
“Contributing to overall growth was a stronger rise in new orders at Russian manufacturers in October,” S&P Global said in a statement. “The pace of increase in new sales accelerated for the third month running to the sharpest since March 2011.”
Moscow is investing heavily in manufacturing, pouring cash into the defence sector to ramp up military production following its February 2022 invasion of Ukraine. The sector’s growth in the more than 20 months since then has been largely predicated on domestic demand.
“The uptick in total sales was led by greater domestic demand as new export orders rose only fractionally and at the slowest pace in the current three-month sequence of growth,” S&P Global said.
Russia is also grappling with a labour shortage, with record-low unemployment limiting Moscow’s output capacity.
“Pressure on capacity led firms to expand their workforce numbers further, as employment grew at the start of the fourth quarter,” S&P Global said. “That said, the rate of job creation eased to the second-slowest in eight months amid challenges finding suitable candidates.”
Expectations for future output remained high, the survey showed.
“Investment in new equipment, product development and greater capacity were all highlighted as factors contributing to optimism among panellists,” S&P Global said.
(Reporting by Alexander Marrow; Editing by Christina Fincher)
