Finance
Russian manufacturing contraction eases but VAT hike fuels inflation, PMI shows
Published by Global Banking & Finance Review®
Posted on February 2, 2026
2 min readLast updated: February 2, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on February 2, 2026
2 min readLast updated: February 2, 2026
Russia's manufacturing contraction eased in January, but a VAT hike increased inflation. Employment fell, and supply chain issues persisted.
MOSCOW, Feb 2 (Reuters) - Russia's manufacturing sector showed signs of stabilisation in January, with the pace of contraction in output and new orders easing, although a recent increase in value-added tax (VAT) drove inflationary pressures higher, S&P Global said on Monday.
The S&P Global Russia Manufacturing Purchasing Managers' Index (PMI) rose to 49.4 in January from 48.1 in December, indicating a marginal decline in manufacturing health but marking the weakest downturn in the current eight-month sequence.
A PMI reading below 50.0 indicates contraction, while above 50.0 signals growth.
Despite a softer decline in output and new orders, the VAT hike led to the steepest increase in input costs in a year.
"A historically elevated rise in input prices following VAT changes led goods producers to increase their output charges during January," the report noted, with firms passing on higher costs to customers.
Employment fell at the fastest rate since last June, as firms cut staffing to manage costs amid reduced working schedules. However, optimism for the year ahead improved slightly, driven by hopes of new product releases boosting orders.
While new export business saw a modest decline, subdued demand in neighbouring markets continued to weigh on sales abroad. Supply chains faced disruptions, with delivery times lengthening to the greatest extent in nearly a year due to logistics challenges.
Overall, the data suggested that while the Russian manufacturing sector is experiencing a less severe contraction, inflationary pressures remain a concern due to tax-driven cost increases.
(Reporting by Gleb Bryanski; Editing by Toby Chopra)
Value-Added Tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power.
Gross Domestic Product (GDP) is the total monetary value of all goods and services produced within a country's borders in a specific time period.
Employment trends refer to the changes and patterns in job availability, workforce participation, and employment rates over time.
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