Page 46 - bne IntelliNews Russia OUTLOOK 2025

Despite easing cost pressures, companies increased selling prices to offset input cost surges.
Labour market trends also pointed to strain. “Production efficiencies and subdued order growth allowed firms to manage backlogs, reducing the need for additional staff,” the report highlighted. Employment levels fell slightly for a second consecutive month, reflecting dampened confidence in future output.
By contrast, the Russia Services PMI posted at 51.2 in December, a decline from 53.2 in November, though it marked the sixth consecutive month of expansion. Firms cited sustained demand and new client wins as key drivers. However, the pace of new order growth softened compared to November, while backlogs of work accumulated at the steepest rate since August 2023.
Employment in the service sector continued to rise, growing at the fastest rate in four months, as firms grappled with capacity constraints. However, cost burdens soared due to exchange rate volatility and supplier price increases, leading to the sharpest input inflation since January 2024.
“Although firms sought to pass on costs to customers, the pace of output price increases moderated to a four-month low,” S&P Global noted.
Supply-side restrictions may be the darkest clouds in Russia’s economic future. Russia, which has struggled with supply-side issues for years, has reached the point where strained production can no longer keep up with demand.
This is manifested as high – and accelerating – inflation, which has gone from a 12-month rate of increase of just over 2% in April 2023 to over 9% in August 2024. The lack of workers, production capacity constraints and restrictions on imports should hit growth for the rest of this year and in years to come.
Russia’s capacity utilisation rate, which has grown rapidly since 2021, has reached historically unprecedented levels of 81%. Industry operates flat out as sanctions have limited access to new machinery and equipment (and spare parts in particular). The situation has deteriorated since the end of 2023.
46 Russia OUTLOOK 2025 www.intellinews.com