Russia: Services PMI rises but remains in contractionary territory in November
December 3, 2020
The IHS Markit Russia Services Business Activity Index rose to 48.2 in November, from 46.9 in October. That, the index remained below the critical 50-threshold, suggesting that operating conditions across the Russian services sector deteriorated for the second consecutive month in November.
November’s improvement was broad-based as both output and new business contracted at a softer pace than in the previous month. That said, downbeat client demand, especially from abroad, and lingering Covid-19 restrictions continued to weigh on business activity among services providers. In turn, backlogs of work continued to decrease which prompted firms to cut their workforce numbers for the third successive month in November. Meanwhile, despite improving somewhat, business confidence remained generally subdued on November due to the pandemic-related uncertainty. Lastly, cost burdens increased at the swiftest rate in nearly two years amid rising wages, with firms passing part of the higher costs onto consumers through increased output charges.
Meanwhile, the IHS Markit Composite Output Index edged up to 47.8 in November, from 47.1 in October, suggesting that stronger activity in the services sector more than offset weaker manufacturing sector dynamics.
Commenting on the composite result, Siân Jones, an economist at IHS Markit, highlighted inflationary backdrop:
"At the composite level, a recurring theme emerged of marked cost pressures. Manufacturers and service providers noted substantial increases in input prices amid supplier shortages, steep imported goods costs and efforts to make workplaces safe. Although inflationary pressure from demand remains muted, currency weakness in part pushed supplier prices higher. Nonetheless, our forecast expects that the annual rate of inflation will average 3.3% in 2020, with price rises weighed down by subdued demand."
Author: Almanas Stanapedis, Research Team Manager