Russia: Services sector returns to growth in July
The Russia IHS Markit Services PMI soared to 58.5 in July, from 47.8 in June, marking the best result since July 2008. As a result, the index climbed well-above below the critical 50-threshold, pointing to a marked expansion in business activity across in the Russian services sector at the outset of Q3, following four months of contraction.
July’s rebound was fueled by a further easing of lockdown measures, which prompted the resumption of operations at service providers and their clients. As a result, new orders rebounded in July on recovering domestic demand which more than offset still-weak foreign demand. That said, firms continued to reduce employment levels, albeit at a softer rate than in June, as backlogs of work fell only modestly. More positively, sentiment rose to a nine-month high in the surveyed month on hopes of stronger global demand. In terms of prices, cost burdens continued to grow, while output charges remained broadly stable.
Reflecting the trend in the manufacturing and services sectors, the Russia Composite Output Index rose to 56.8 in July, from 48.9 in June.
Commenting on the composite result, Sian Jones, an economist at IHS Markit, said:
“The Russian service sector saw a renewed and substantial uptick in business activity and client demand in July. […] At the composite level, manufacturers and service providers often signalled contrasting trends, as manufacturing client demand weakened at the start of the third quarter. On the price front, the rate of input cost inflation remained historically solid, but strong competition and further discounting by some private sector firms meant only muted rises in selling prices.”