Processing in the red: will there be a recession in the Russian industry
Another monthly survey of purchasing managers showed a new decline in business activity in the manufacturing industry. At the same time, orders, production volumes and employment fell. Experts interviewed by Izvestia believe that the key interest rate has been kept at a high level for a long time, a decrease in consumer demand, as well as seasonal factors are the main reasons for the decline in industry. Nevertheless, although the PMI is a leading indicator, it is too early to talk about the threat of recession or a general downturn in the industry.
The worst since March 2022
According to a study by S&P Global, the Russian manufacturing PMI in July 2025 was 47 points, down from 47.5 points in the previous month, according to a study by S&P Global. An indicator above 50 points means an increase in business activity, below this level — its decline.
The deterioration in operating conditions in the sector was the strongest since March 2022. The volume of new orders in July decreased for the fourth time in the last five months amid weak customer demand, and the rate of decline accelerated to the fastest since that month. The bright spot of the negative report was the demand from foreign customers: new export orders increased for the first time in five months.
Production volumes in July fell at the sharpest pace in three years. Although company costs and selling prices continued to rise last month, cost inflation slowed to a minimum. Selling prices, in turn, grew at the weakest pace since November 2022, taking into account increased competition and the slowest growth in operating costs since the start of observations (i.e. since February 2009).
Employment in the industry continued to decline in July. Companies have reduced the volume of work in progress due to low capacity utilization. At the same time, respondents to the S&P Global survey remained optimistic about the production prospects for the next 12 months. Representatives of the Russian business, in particular, hoped that investments in new product lines and equipment would help them increase sales. However, even with this in mind, the optimism of enterprises fell to the lowest level since August 2022 due to economic uncertainty and financial difficulties for customers.
There will be no frontal growth
As Egor Zinoviev, an analyst at Cifra Broker, stated in an interview with Izvestia, the decline in business activity is most likely due to low demand.
"Moreover, if we look at factories in the automotive industry, they are massively switching to a four—day working week, which indicates weak demand, which is obviously associated with high rates in the economy and the inability for many to take out loans at such rates," the expert points out.
Olga Belenkaya, Head of the Macroeconomic Analysis Department at Finam Federal State Enterprise, notes that in 2023-2024, growth in the manufacturing industry covered almost all major industries, with a significant outperformance in the dynamics of industries associated with a large share of the military-industrial complex. The expert provides the following data. In the first half of 2025, the resources for "frontal growth" were no longer enough. In the manufacturing industry, growth is increasingly concentrated in three sectors related to the defense industry: the production of other vehicles and equipment (including aviation equipment, shipbuilding, etc.) — plus 34.6%. It added the production of computers, electronic and optical products — 15.1%, the production of finished metal products, except machinery and equipment — 13.6% and one civilian industry (the production of medicines and materials used for medical purposes and veterinary medicine — 14.5%).
"But in these three sectors of the defense industry, the growth rates are also lower than last year, and fluctuations in output there from month to month affect the overall dynamics,— the Izvestia interlocutor states.
She added that at the other pole there are industries focused on external demand (metallurgy, woodworking), housing construction (building materials, as well as metallurgy), investment activity and part of consumer demand.
— There is a noticeable decline here against the background of tight housing and communal services and cooling demand in such segments as housing construction and the automotive industry, after the "overheating" of last year. Production of motor vehicles, trailers and semi—trailers in the first half of 2025 fell by 16.6%; production of other non—metallic mineral products (building materials) — 7.1%; furniture production - 4.6%; production of rubber and plastic products - 4.0%; metallurgical production — 3.4%. In most other manufacturing industries, we can rather talk about stagnation," Olga Belenkaya points out.
The rate and budget expenses will decide everything.
Given that the level of business activity usually predicts the general direction of development in the coming months quite well, is it possible to talk about a full-fledged recession in the economy in the remaining quarters of the year? Economists believe that not everything is so clear.
"The trend is negative, it does not mean an inevitable economic downturn, especially against the background of continued activity in the defense and infrastructure sectors," said Dmitry Evdokimov, a researcher at the Laboratory for Quantitative Analysis of Economic Effects at the Gaidar Institute. — The continuation or change of this trend will largely depend on the further dynamics of budget expenditures and the Central Bank's policy regarding the trajectory of the key rate.
According to Zinoviev, so far everything is not so bad, hypothetically the key rate at 18% can somehow keep the situation more or less afloat. Therefore, it is too early to talk about a recession.
"In the second half of 2025, the beginning of a reduction in the Central Bank's key rate may gradually lead to some easing of monetary conditions and a revival of lending, although rates are still too high," Olga Belenkaya notes. — Another possible factor is the seasonal increase in government spending at the end of the year due to the closure of government contracts. At the end of last year, this became a serious factor in the sharp point acceleration of industrial growth. This year, the Ministry of Finance planned to make the dynamics of government spending more even within the year, but let's see how much it turns out.
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