Russia’s Industry Defies Forecasts with 3.7% YoY Jump

Russia's Industrial Production rose 3.7% YoY in January 2026, outpacing both the forecast of -1.0% and the previous month's -0.7% according to data.

This marks a reversal from the weak industrial activity seen earlier and suggests improved economic resilience amid ongoing geopolitical and policy pressures.

The services sector also expanded at its fastest pace in a year, with the S&P Global Russia Services PMI reaching 53.1, driven by strong new orders and customer demand.

However, a recent VAT hike introduced inflationary pressures, with service providers raising prices to offset higher operating costs.

The Composite PMI Output Index for manufacturing and services rose to 52.1 in January, signaling renewed expansion in the private sector.

Russia's industrial production data for January 2026 came in significantly better than expected, with a 3.7% year-over-year increase. This beats not only the previous month's contraction of -0.7% but also the widely anticipated forecast of -1.0% according to reports. The surprise strength in manufacturing output suggests that the Russian economy may be showing signs of resilience amid global economic headwinds and geopolitical tensions. The data also indicates that industrial firms are responding to stronger demand, potentially driven by domestic consumption or export markets.

The broader economic context adds further interest. Russia's services sector has simultaneously expanded at its fastest rate in a year, reaching 53.1 on the S&P Global Russia Services PMI index. This reflects strong new business and customer demand, supported by aggressive marketing efforts and improved consumer confidence. However, the services sector is also experiencing inflationary pressures, particularly from a recent VAT hike. These pressures have led to higher operating costs and prompted service providers to raise prices in response.

Given the interconnected nature of Russia's industrial and services sectors, this dual expansion suggests a broader recovery in private-sector activity. The Composite PMI Output Index rose to 52.1 in January 2026, indicating a renewed expansion in both manufacturing and services. This is a significant development, as it shows that the Russian economy is maintaining momentum despite the broader macroeconomic uncertainties and trade-related challenges.

For investors, the key takeaway is the potential for a more stable economic backdrop in Russia, which could reduce the volatility typically associated with the country's markets. However, this optimism must be tempered by ongoing concerns about global demand for Russian oil, particularly with Indian refiners reducing purchases and the EU imposing continued restrictions on Russian energy exports according to analysis. Additionally, the inflationary pressures introduced by the VAT hike could complicate future growth, particularly if they lead to higher input costs or reduced consumer spending.

Investors should keep an eye on upcoming data releases, particularly industrial production and services sector PMI readings for February 2026, as well as broader inflation indicators. These will help determine whether the current upturn in activity is sustained or merely a temporary rebound. In the meantime, the resilience shown in January may offer some reassurance to those with exposure to Russian equities, commodities, or global markets influenced by Russian trade flows.

As the Russian economy continues to navigate a challenging geopolitical environment, the interplay between industrial output, services sector expansion, and inflationary pressures will remain a focal point. The data for January 2026 suggests that the economy is not only stabilizing but potentially growing under current conditions. However, without a clear resolution to the external trade headwinds and internal inflationary pressures, the sustainability of this growth remains uncertain.