Russia’s manufacturing sector has shown its weakest performance in over two years in July.

Source: Reuters

Details: The Purchasing Managers’ Index (PMI) dropped to 47.0 points in July, down from 47.5 in June. This marks the second consecutive sharp decline and signals a contraction in the sector, as readings below 50 indicate decreasing activity.

Companies report a significant deterioration in conditions – demand is falling, clients are facing financial difficulties and payment delays are growing. As a result, both production volumes and the number of new orders are shrinking.

Despite the militarisation of the economy and large-scale state orders since the start of the full-scale war against Ukraine, industrial growth in Russia has begun to slow. The Central Bank is attempting to stimulate the economy by lowering the key interest rate to 18%, but loans remain prohibitively expensive.

The drop in new orders was particularly sharp – the steepest since March 2022. While export orders saw a slight increase, overall business confidence among companies has fallen to its lowest level in nearly three years.

Business remains cautiously optimistic, hoping for new investments and modernisation, but economic instability and declining consumer purchasing power are dampening sentiment.

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