Russia: Services and Composite PMIs sink to record lows in April
The IHS Markit Russia Services Business Activity Index nosedived to 12.2 in April, from 37.1 in March, marking the lowest result since the series began in October 2001. As a result, the index sank further below the critical 50-threshold, pointing to an unprecedented contraction in business activity across the Russian service sector at the beginning of the second quarter.
The downturn was attributed to the increasingly severe fallout from Covid-19 after the government imposed strict measures to contain the pandemic at the end of March. Both new orders and output collapsed in April, chiefly as a result of temporary business closures and plummeting consumer demand reflected in cancellation and postponement of standing orders. As a result, firms slashed their employment levels again in April and were forced to lower output prices despite growing cost burdens. Lastly, business confidence remained negative, despite a slight improvement from March.
In a similar fashion, the Russia Composite Output Index plunged to an all-time low of 13.9 in April, from 39.5 in March.
Commenting on the composite result, Sian Jones, an economist at IHS Markit, noted:
“The sudden shock to business operations became blatantly apparent in April, as new order inflows dried up and firms cut employment at the sharpest rate in the series history. Pessimism felt across the manufacturing sector towards output over the coming year was reflected by their service sector counterparts. In line with negative expectations among private sector firms, we currently forecast a 3.6% contraction in GDP in 2020.”