Russia: Services PMI plunges into contractionary territory in October
The IHS Markit Russia Services Business Activity Index plunged to a five-month low of 46.9 in October from 53.7 in September. As a result, the index slipped below the critical 50-threshold, suggesting that operating conditions across the Russian services sector deteriorated for the first time since June in October.
October’s downturn was largely driven by a marked drop in new businesses, which contrasted September’s increase and chiefly reflected deteriorating demand conditions due to restriction measures implemented to contain the second wave of the Covid-19 pandemic. As a result, output fell and pressure on capacity remained downbeat, prompting service providers to cut back their workforce numbers further in October. Moreover, rising uncertainty bruised business confidence, while input costs jumped due to ruble weakness.
Meanwhile, the IHS Markit Composite Output Index dived 47.1 in October from 53.7 in September, pointing to a broad-based contraction in the Russian private sector at the outset of Q4.
Commenting on the composite result, Sian Jones, an economist at IHS Markit, noted:
“At the composite level, manufacturers and service providers exhibited similar trends as the pandemic exerted itself once again. Our latest forecast sees a 9.5% decline in GDP during the fourth quarter compared to the same period a year ago, with the downturn expected to be extended into the opening three months of 2021.”