Russian service sector business activity grows steeply in December

Russian service sector’s business activity grew steeply in December, according to the survey data. The IHS Markit Russia Services Business Activity index came in at 56.8 in the month, slightly down from 57.4 in November. The latest index suggested steep, but softer growth in business activity throughout the nation’s service sector. Panellists implied that the latest rise in output was because of stronger client demand and increased new order volumes.

The IHS Markit Russia Composite Output Index dropped to 56 from 56.3 in the prior month. The latest index hinted at a slightly slower overall growth at the end of the year, in spite of an accelerated manufacturing output upturn.

New business received by service providers continued to rise in December, although at a weaker rate than in November. Anecdotal evidence stated that the latest rise was attributed to larger demand from new and existing clients. Even if the rate of growth decelerated, it was robust and above the long-run series average. Meanwhile, manufacturers hinted at an accelerated upturn in new orders that was the most rapid since July.

In the meantime, inflationary pressures were historically weak in spite of the pace of rise in charges accelerating. Output prices rose at a moderate rate; however, inflation was below the long-run series average. Input costs rose at the most subdued rate since June, and one that was relatively muted.

Surveyed companies stated that higher prices for energy and fuel drove the increase in cost burdens, which were partially passed on to clients. Consistent with their service sector counterparts, manufacturers recorded comparatively moderate rises in both input price and changes. Furthermore, the rates of increase softened to four-and five-month lows respectively.

Consistent with steep, but softer business activity growth, the latest growth in staffing levels was weaker than that seen in November. However, several panel members stated that job creation reflected higher output levels and new business growth. Employment levels also rose at the second-fastest rate since May 2013. A marginal decline in the level of outstanding business meanwhile indicated reduced pressure on capacities. In the meantime, goods producers indicated a fourth straight month of backlog depletion and widely unchanged employment levels.

Business sentiment towards the outlook among service sector companies was strong in December, with the degree of optimism to the second-highest in five years. A number of survey respondents implied positive sentiment was because of stronger demand from new and existing clients and expansion into new markets. Manufacturing companies also hinted at a stronger degree of sentiment in December, with optimism rising to the highest since September.

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