In June, the Russian manufacturing sector contracted at the sharpest rate in three years, with declines in production, new orders, and employment, according to a business activity survey.

In June, the Russian manufacturing sector contracted at the sharpest rate in three years, with declines in production, new orders, and employment, according to a business activity survey.

Source: The Moscow Times, citing the S&P Global Purchasing Managers’ Index

Details: In regard to the Russian manufacturing sector, the index fell to 47.5 in June from 50.2 in May, dropping below the 50-point mark again and indicating a decline in business activity after just one month of growth.

This is the sharpest decline in the index since March 2022, when Russia launched its full-scale invasion of Ukraine, after which the West imposed sanctions against Russia.

Production has been declining for the fourth month in a row, and new orders have fallen after growing in May.

“The decline in new work volumes is attributed to lower customer purchasing power and weak customer demand,” S&P Global said in a statement.

Russia’s significant spending on weapons initially contributed to the expansion of the industrial sector, but industrial production began to slow last year.

In June, new export orders declined at the fastest rate since November 2022. According to S&P Global, unfavourable exchange rates affected competitiveness in key export markets.

Employment fell for the second time in three months as manufacturers began prioritising the reduction of costs. The pace of job cuts was the sharpest since April 2022, reflecting lower production needs.

Background:

Earlier it was reported that Russia is gradually exhausting its macroeconomic reserves, in particular the National Welfare Fund (NWF), but its potential for further financing of aggression remains.The Kremlin plans to cut defence spending, which has reached record levels since the days of the USSR.German Gref, head of Russia’s Sberbank, said that the Russian economy is entering a period of difficult trials. And the difficulties in the Russian economy due to military spending, inflation and high interest rates will continue in 2026.Russian banks are becoming increasingly concerned about the amount of bad debt on their balance sheets. They are privately sounding the alarm that more and more corporate and private customers are relying on loans due to high interest rates.The coal industry in Russia is in the midst of a severe crisis, described as the worst since the 1990s. Last year and in the first quarter of this year, there were more loss-making companies in this industry than profitable ones (61.8%).

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