Russia: Services and Composite PMIs dive to over 11-year lows in March
The IHS Markit Russia Services Business Activity Index sank to 37.1 in March, from 52.0 in February, marking the weakest result in over 11 years. As a result, the index dived sharply below the critical 50-threshold, signaling a dramatic contraction in business activity across the Russian service sector at the end of the first quarter.
The deterioration was driven by the strict containment measures put in place by the government to tackle the spread of the Covid-19 pandemic. This, coupled with widespread global lockdowns hammered both domestic and external demand, leading to the sharpest contractions in output and new orders since the Global Financial Crisis of 2009. Furthermore, increasing fears of a global and domestic recession turned business confidence negative and sent it tumbling to a record-low in March.
In a similar fashion, the Russia Composite Output Index plunged to an over decade-low of 39.5 in March, from 50.9 in February.
Commenting on composite result, Sian Jones, an economist at IHS Markit, noted:
“The Russian service sector was greatly impacted by the outbreak of COVID-19 in March […] At the composite level, private sector output fell at the quickest rate for over 11 years, with the first quarter ending on a negative note. Our current forecast signals broad stagnation across the Russian economy in 2020, with contractions expected in the middle quarters of the year. Meanwhile, inflationary pressures have accelerated, as the base effect from last January’s VAT hike faded. The rate of inflation is forecast to quicken throughout 2020.”