Russia’s manufacturing sector remained in the red in May, although the pace of decline eased slightly as factories increased production to clear backlogs despite a sharper fall in new orders, according to S&P Global data.  (chart)

The seasonally adjusted S&P Global Russia Manufacturing Purchasing Managers’ Index (PMI) rose to 48.8 in May from 48.1 in April. A reading below 50 indicates contraction. While the latest figure signalled a continued deterioration in operating conditions for manufacturers, it represented the softest decline in three months.

The survey pointed to worsening demand conditions across the sector. “Weak client demand and a drop in purchasing power at customers were widely cited by panellists as driving the decrease in new orders,” S&P Global said. New orders contracted at the sharpest rate since July 2025, while export sales fell at their fastest pace since September 2025.

Despite weaker demand, manufacturing output returned to growth after a 14-month sequence of contraction. S&P Global said the increase in production was “broadly attributed by panellists to clearing backlogs of work”. Outstanding business declined at a substantial pace, with the reduction described as “the steepest in over six years”.

The fall in workloads continued to weigh on employment. Manufacturers reduced staffing levels for another month, with companies citing “reduced business requirements and the non-replacement of voluntary leavers”. Although the pace of job cuts eased from April, it remained the second-fastest since June 2025.

The survey also highlighted renewed inflationary pressures. Russian manufacturers recorded a third consecutive monthly acceleration in input cost inflation, driven by higher prices for fuel, metals and electrical equipment. The increase was the second-fastest since January 2025, although still below the surge seen at the start of 2026 following a rise in value-added tax.

Higher costs fed through to selling prices, with producers raising charges at the fastest pace since February 2025, excluding January’s VAT-related spike. “Panellists highlighted that hikes in output prices were stymied by weak demand, however,” the report noted.

Manufacturers increased purchasing activity for the first time in several months as firms sought to build precautionary inventories amid rising costs. S&P Global said efforts to accumulate stocks of purchases were often successful despite continued, albeit marginal, deterioration in supplier performance.

Confidence about the year ahead weakened. Although firms still expected production to expand over the next 12 months, “concerns regarding customer purchasing power and liquidity weighed on positive sentiment, according to firms”. Sentiment remained below the long-run survey average.