Russia’s manufacturing sector slipped further into the red in March, as weakening demand, falling output and declining business confidence highlighted mounting pressure on industrial activity, according to the latest data from S&P Global. (chart)

The seasonally adjusted S&P Global Russia Manufacturing Purchasing Managers’ Index stood at 48.3 in March, down from 49.5 in February. S&P Global said this “signalled a modest decline in the health of the sector”, with “the downturn the strongest in 2026 so far”.

The deterioration was driven by softer demand conditions. According to the report, “panellists often mentioned that competition and reduced purchasing power at customers led to another monthly fall in new orders during March”. The decline in new business was “modest overall and the quickest since last October”, with export orders also continuing to fall, albeit at a slower pace.

Output followed a similar trajectory. S&P Global noted that “Russian manufacturers recorded a continued contraction in output levels at the end of the first quarter”, with the pace of decline “the fastest in three months and solid overall”.

In response to weaker demand, firms scaled back purchasing activity sharply. “The drop in purchasing activity was marked and the strongest in four years,” the report said, adding that “cost considerations led to the reduction in purchasing”. Companies also ran down inventories, as “stocks of finished goods and purchases” were depleted to meet sales.

Labour market conditions remained subdued. The survey signalled “another monthly cut to workforce numbers at Russian manufacturers in March”, with employment falling for a fourth consecutive month. The decline was linked to “redundancies following lower output levels and moves to piecework pay”.

Cost pressures, however, intensified. S&P Global said “input prices rose at the second-fastest pace in just over a year (behind January 2026), as higher fuel and supplier costs drove up inflation”. Despite this, firms struggled to pass on higher costs, with “the pace of increase slowed notably to only a marginal rate and was historically muted” for output charges, reflecting competitive pressures.

Looking ahead, sentiment weakened further. While expectations remained positive, “the degree of optimism fell for the second month running to the lowest in almost four years”, with “subdued demand conditions and concerns regarding customer solvency” weighing on the outlook.

The data points to a manufacturing sector under strain from weakening domestic demand, rising costs and persistent external headwinds, even as firms attempt to adjust production and pricing strategies.