The Russian industrial sector is choking: demand is falling, orders are decreasing

Business activity in Russia’s industrial sector fell in July 2025 to its lowest level since March 2022, with the PMI (a measure of production and new orders) falling to 47.0. For comparison, it was 47.5 in June and 50.2 in May. A reading below 50 indicates a contraction in business activity.

This is evidenced by data from S&P Global, Reuters reports.

Analysts attribute the decline to weak demand, financial difficulties of customers and a significant decrease in new orders in the domestic market. This indicator has decreased for the fourth time in the last five months, and the rate of decline has become the highest since the beginning of Russia’s full-scale invasion of Ukraine.

Manufacturers are reporting problems with access to financing and payment delays. Due to reduced demand, companies are forced to reduce purchases and reduce production volumes.

Despite the overall negative dynamics, export orders in July increased slightly for the first time in five months, which may be due to increased demand in certain foreign markets.

However, business confidence among Russian manufacturers remains extremely weak — it has fallen to its lowest level since August 2022. Businesses are cautiously assessing prospects due to economic uncertainty and the deterioration of consumers’ financial situation.

After the start of the full-scale war against Ukraine, Russian industry was sustained for a while thanks to the growth in the production of military equipment. But over the past year, the growth rate has slowed. High interest rates, rising credit prices, and a general decline in demand have exacerbated the crisis processes in the economy.

As a reminder, the Russian nuclear industry is rapidly deteriorating. The flagship of the Russian economy, Rosatom, which operates 11 nuclear power plants and generates 20% of electricity in the Russian Federation, has appealed to the state.

As reported, up to 20% of car dealerships in Russia may close by the end of the year.

In addition, Russia’s largest automaker AvtoVAZ has suspended production from July 29 to August 11 inclusive . The official reason is “corporate vacation,” but in reality the decision is related to a critical situation on the market: the company’s warehouses are overflowing with unsold cars.

By the way, the civil maritime program, which the Russian authorities actively promoted in 2023, has undergone a significant reduction — more than 40% of the planned volume.

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