Russia: Services PMI edges down in December
December 31, 2020
The IHS Markit Russia Services Business Activity Index edged down to 48.0 in December, from to 48.2 in November. As a result, the index moved further below the critical 50-threshold, suggesting that operating conditions across the Russian services sector deteriorated for the third consecutive month in December.
December’s result chiefly reflected sustained contractions in new business and output. Output continued to shrink due to eviscerated client demand and a further drop in new orders, which decreased for the third consecutive month amid falling purchasing power among clients. Similarly, new export orders declined again in December, albeit at a softer pace than in the previous month. Meanwhile, cost burdens rose at the second-fastest since March in December, owing to price hikes and unfavorable exchange rate movements. Firms shifted part of higher costs to consumers, raising output charges at the quickest pace since April 2019. Lastly, firms remained upbeat over the outlook for output, with optimism hitting a four-month high in December.
Meanwhile, the IHS Markit Composite Output Index edged up to 48.3 in December, from 47.8 in November, suggesting that softer activity in the services sector was more than offset by healthier manufacturing sector dynamics.
Commenting on the composite result, Siân Jones, an economist at IHS Markit, highlighted the inflationary backdrop:
"At the composite level, a key point of interest continued to be focussed on inflationary pressures. The rate of increase in cost burdens remained historically elevated, and firms sought to pass on higher prices where they could. Nonetheless, the Central Bank of Russia (CBR) expects the recent spikes in supply-side inflationary risk to be temporary and therefore has held interest rates at 4.25%.”
Author: Almanas Stanapedis, Economist