Russian economy meltdown as car sales 'crash' by 25% and manufacturing plunges

Russia's economy is showing signs of strain as fresh data shows a downward trend in the nation's key sectors - manufacturing and cars. According to Russia's manufacturing Purchasing Managers' Index (PMI), the month of June saw the sharpest contraction of the country's manufacturing since the first few weeks of the full-scale invasion of Ukraine in 2022.

The data from S&P Global shows a reversal from the PMI of 50.2 in May to 47.5 last June, as the country struggles to cope under the strain of war. S&P Global wrote: "The Russian manufacturing sector signalled a renewed deterioration in operating conditions during June." It is understood that the downturn is as a result of weak client demand and a stronger ruble which increases the cost of Russian exports.

Russia has coped better than many analysts predicted following a range of sanctions and financial measures taken in response to the country's invasion of Ukraine.

But some fear that the country's coping mechanisms are not sustainable in the long-term.

Alexander Kolyandr, a senior fellow at the Center for European Policy Analysis, said last month that the fueling of the nation's wartime economy "was growth on budgetary amphetamines."

The first quarter of this year has seen Russia's GDP grow by just 1.4%, significantly less than the 4.5% growth it saw in the final quarter of last year.

Kolyandr added: "Whether it's a managed slowdown or a severe drop, we still don't know.

"Nevertheless, we see the economy slowing down."

Last month, Russian economy minister Maxim Reshetnikov warned that the country was on the "brink of a recession", with Russian media similarly painting a bleak picture for the nation's economic outlook.

In today's Russian papers, Nezavisimaya Gazeta said: "In June the Russian car market kept up its 25% fall.

"Because of expensive credit the Central Bank has crashed car sales and manufacturing.

"Sales of new cars in Russia in June may have fallen by a quarter. Car dealers do not believe that demand will return this year."

Another newspaper's front page read: "The Russian government has promised to solve the crisis in the coal industry in 2026.

"Russian officials are hoping for a rise in global prices, although this contradicts international forecasts."