MOSCOW (Reuters) - Russia's manufacturing sector continued to expand in December, but at a slower pace than the previous month, as inflationary pressures remained high and business confidence weakened, S&P Global reported on Friday.
The Purchasing Managers' Index (PMI) for Russian manufacturing edged down to 50.8 in December from 51.3 in November, indicating a marginal improvement in sector health. A PMI reading above 50 signals growth, while below 50 indicates contraction.
New orders saw a slight increase, supported by sustained client demand, but the growth rate was below the long-term average.
Export orders rose for the fifth consecutive month, driven by increased trade with neighbouring countries, although the pace of expansion was the weakest since August.
Despite the growth in orders, output expansion was modest, with firms citing softer demand and material shortages.
"The rise in production was linked to a sustained uptick in new order inflows," the report noted.
Inflationary pressures remained elevated, with input costs rising due to material price hikes and unfavourable exchange rate movements. Output prices also increased, although the rate of inflation softened to a three-month low.
Employment levels fell for the second month in a row, reflecting subdued demand and sufficient capacity. Firms reduced workforce numbers slightly, with backlogs of work declining only fractionally.
Manufacturers increased input buying to rebuild stocks and mitigate future price hikes but supply chain issues, particularly in rail transportation, led to longer delivery times.
Overall, Russian manufacturers remained optimistic about future output, although confidence has waned due to concerns over higher prices and material shortages.