Russian factory activity cools in October as Putin drafts 300,000 for Ukraine

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A fragile recovery in Russia’s manufacturing sector slowed in October as sanctions combined with a massive call for workers to fight in Ukraine weighed on the country’s producers, a business survey showed on Tuesday.

The S&P Global Purchasing Managers’ Index (PMI) fell in October to 50.7 from 52.0 in September, approaching the 50.0 mark that separates expansion from contraction.

Employment levels in the manufacturing sector fell at their fastest pace in six months, according to the survey.

President Vladimir Putin announced a “partial mobilization” at the end of September, and in the past five weeks some 300,000 reservists – mostly young workers – have been recruited for the military campaign in Ukraine.

“The drop in numbers has been solid overall and the fastest since April. A number of companies have suggested the drop in headcount was due to labor shortages,” S&P Global said.

The survey is the latest sign that the mobilization is weighing on a Russian economy already struggling with sanctions, export bans, currency volatility, capital controls and an exodus of Western companies.

Russia’s central bank said last week that the mobilization would worsen labor shortages and create “supply-side restrictions in the wider economy”.

Foreign demand also fell sharply during the month, according to the PMI survey, as sanctions that have cut the industry off from global payment systems, disrupted supply chains and banned the export of crucial materials and services. ‘high-tech equipment to Russia, continue to weigh on the economy. .

Despite these headwinds, manufacturers’ assessments of future production came in at their second-highest monthly reading in 3½ years, S&P Global said.

The companies said they expected business to grow thanks to the country’s import substitution campaign and hoped the most disruptive period of economic turbulence had passed.
Source: Reuters (report by Jake Cordell; editing by Hugh Lawson)

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