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Russian factory activity expands at quickest rate in six years in Feb -PMI

An employee works in a blast furnace shop at Magnitogorsk Iron and Steel Works

MOSCOW (Reuters) - Activity across Russia's manufacturing sector expanded at its fastest rate in six years in February, driven by upticks in production and new sales, while higher input costs added to inflationary pressures, a business survey showed on Wednesday.

The S&P Global Purchasing Managers' Index (PMI) rose in February to 53.6 from 52.6 in January, moving further above the 50 mark that separates expansion from contraction.

The sector has now seen growth for 10 months in a row, an upturn predicated on domestic demand as new export orders have contracted for 13 months running, while Moscow has prosecuted what it calls a "special military operation" in Ukraine.

Sweeping Western sanctions and a mass corporate exodus from Russia have caused logistics delays and material shortages in the last year, but firms have demonstrated some resilience.

Manufacturing firms surveyed highlighted that February's solid rise in production was linked to import substitution and a further expansion in new orders, S&P Global said in a statement.

Input costs increased further, the survey showed, with the rate of inflation accelerating.

"The pace of increase in input prices was sharp and the fastest since May 2022," S&P Global said. "Hikes in supplier charges, alongside unfavourable exchange rate movements, reportedly drove prices higher."

Inflation in Russia is threatening to quicken once more, limiting the central bank's room to lower interest rates and foster economic growth. Inflationary expectations among Russian households rose to 12.2% in February, data showed this week.

Greater client demand and a growing customer base kept Russian manufacturing firms optimistic for the year ahead, but the degree of confidence at manufacturers slipped to a four-month low.

"Concurrently, the rate of job creation eased further," S&P Global said.

(Reporting by Alexander Marrow; Editing by Susan Fenton)