Russia’s service sector’s improvement gains momentum in April, output expands sharply

Russia’s service sector’s improvement gathered higher momentum in April as output grew at the sharpest pace in more than three years. Strong rise in new business intakes mainly drove the growth. But there were still reports of job cuts, while the incomplete work’s volumes continued to decline. Also, price pressures were seen again in the sector as output charges and input costs both rose.

Russia’s seasonally adjusted Markit Russia Services Business Activity Index was up from March’s 52 to 54.2 in April. This is the strongest reading since March 2013 and hints at a strong rebound in service providers’ business activity, noted Markit. Russia’s overall activity at the aggregate level expanded for the third consecutive month in April. The Composite Output Index rose to 51.3, an 11-month high. The increase took place in spite of the manufacturing output contracting at the sharpest rate since May 2009.

New business intakes in Russia’s service sector grew further in April, driving the expansion in output. The rate at which it grew was the quickest in nine months, noted Markit. In contrast to this, new orders received by Russia’s goods producers declined further. Meanwhile, service providers continued to reduce their number of employees in April in spite of large number of new projects. The rate of laying off quickened in April from March. Similarly, manufacturers also cut back staff levels for the 34th consecutive month.

Meanwhile, capacity pressures in the service and manufacturing sectors continued to fade, emphasized by a further drop in business outstanding. Moreover, the service sector companies recorded higher input prices again last month. The inflation pace accelerated to a three-month high. According to panellists, this is due to an increase in fuel price.

In April, Russia’s service sector companies carried on increasing their output charges. However, the price rise rate was slower than the long-run series average. Meanwhile, service providers were less upbeat about future business activity. But the positive sentiment lowered just marginally since March.