What's happened
In June 2025, Russia's manufacturing PMI dropped to 47.5, indicating a significant contraction. This decline is attributed to weak demand and a strong ruble, leading to job cuts and reduced business confidence. Analysts warn that the economy's resilience since the Ukraine invasion may not be sustainable.
What's behind the headline?
Key Insights
- Economic Indicators: The drop in the PMI to 47.5 signals a contraction, with new orders declining due to weak client demand.
- Job Cuts: Factories are cutting jobs at the fastest rate since April 2022, reflecting deteriorating conditions.
- Business Confidence: Sentiment among manufacturers has plummeted, reaching its lowest since October 2022, indicating growing concerns about global economic uncertainty.
- Sustainability of Growth: Analysts caution that the growth seen in recent years, driven by wartime spending, is not sustainable. Alexander Kolyandr noted that the economy is slowing down, questioning whether this is a managed slowdown or a severe drop.
- Future Outlook: With the economy on the brink of recession, the implications for inflation and interest rates are significant, as the central bank has already raised rates to 20%.
What the papers say
According to Huileng Tan from Business Insider UK, the June PMI drop reflects a renewed deterioration in Russia's manufacturing sector, driven by weak demand and a strong ruble. The report highlights that factories are cutting jobs and purchasing activity at unprecedented rates. In contrast, the Independent's coverage emphasizes the fragility of the UK's manufacturing sector, which also faces challenges from global demand and economic uncertainty. While the UK PMI showed slight improvement, it remains below the growth threshold, indicating ongoing struggles in manufacturing. This juxtaposition illustrates the broader economic challenges both countries face, with Russia's situation appearing more dire as it grapples with potential recessionary pressures.
How we got here
Russia's economy has shown resilience since the 2022 invasion of Ukraine, largely due to government spending. However, recent indicators suggest a downturn, with the manufacturing sector experiencing its sharpest contraction since March 2022, raising concerns about a potential recession.
Go deeper
- What factors are contributing to the decline in Russia's manufacturing?
- How does this impact the overall Russian economy?
- What are analysts predicting for the future of Russia's economy?
Common question
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