MOSCOW, (Reuters) - Russian manufacturing activity expanded March, boosted by higher output and new business growth as domestic demand substituted demand from abroad, the Markit purchasing managers' index (PMI) showed on Monday.
The index's headline reading rose to 52.8 from 50.1 in the previous month, above the 50.0 mark that separates expansion from contraction.
"Russian manufacturers signaled a significant uptick in domestic demand and production in March, indicating a solid end to the first quarter of 2019 following relatively lackluster growth in February," said Sian Jones, an economist at IHS Markit, which compiles the survey.
The increase in new orders was the strongest since early 2017 despite a drop in foreign client demand for the third month in a row.
The degree of optimism among firms that took part in the survey reached the highest level since data collection began in 2012, while employment across the sector rose for the second consecutive month, the monthly PMI report showed.
Inflation in the sector kept on rising following an increase in value-added tax (VAT) to 20 percent from 18 percent.
"The ongoing impact of the recent hike in VAT and higher supplier costs continued to push input prices up. In response, firms raised factory gate charges sharply," Jones said.