Russian factory activity expands in April as export orders pick up

MOSCOW  – Activity in Russia’s manufacturing sector grew for the 12th month running in April, and new export orders ended a 14-month sequence of decline, while inflationary pressures regained momentum, a business survey showed on Tuesday.

The S&P Global Purchasing Managers’ Index (PMI) for Russian manufacturing dropped in April to 52.6 from 53.2 in March, the pace of growth easing for the second month running but remaining above the 50 mark that separates expansion from contraction.

Until now, domestic demand has been the key driver of the sector’s growth, as new export orders have contracted stubbornly as Moscow prosecutes what it calls its “special military operation” in Ukraine.

“Increased new export orders reportedly stemmed from the diversification of export markets and the introduction of new product lines,” S&P Global said in a statement.

Overall growth was driven by further increases in output and new orders, helped by firms expanding their workforce numbers, enabling them to work through backlogs at a quicker rate.

Rising military production and huge state spending are keeping Russian industry buzzing along, a Reuters analysis of data showed in early April, helping to soften the economic impact of Western sanctions and enabling Moscow to plough on with its military campaign in Ukraine.

S&P Global said inflationary pressures had regained momentum during April, with hikes in operating expenses reportedly driven by unfavorable exchange rate movements and greater logistics costs. Russian officials have flagged the weaker ruble as an inflation risk.

“Rates of inflation reached the fastest for a year as firms sought to pass through hikes in supplier prices to customers,” S&P Global said.

Expectations for future output rose to the second-highest level for four years.

“Optimism was driven by plans for new product development, investment in marketing and hopes of a further uptick in customer demand,” S&P Global said.

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