Service sector

Russian service sector activity contracts in January as overseas sales slow

MOSCOW, Feb 3 (Reuters) – Activity in Russia’s service sector contracted in January for the fourth consecutive month, hampered by a drop in overseas sales, but the decline was the slowest in During this period, the decline in customer demand has eased, a company survey showed on Thursday.

IHS Markit’s Purchasing Managers’ Index (PMI) rose to 49.8 in January from 49.5 in December, just below the 50 mark that separates expansion from contraction.

New export activity fell at its fastest pace since December 2020, amid heightened tensions between Russia and the West over security concerns in Europe.

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Weak demand has also put pressure on employment, with businesses shedding staff at the fastest rate in 13 months, while backlogs have fallen again.

“Pricing pressures continued to be a nuisance as rising utility and supplier costs were partially passed on to customers, and to a greater extent despite subdued demand,” said Sian Jones, senior economist at survey compiler IHS Markit.

Annual inflation in Russia has accelerated to its highest level since early 2016, well above the central bank’s 4% target. Analysts polled by Reuters expect the bank to raise its key rate by 100 basis points to 9.5% on February 11. read more

“While upside risks to inflation remain plentiful, the central bank may need to take further action over the coming months to rein in price increases,” Jones said.

A sister survey showed on Monday that Russian manufacturing activity rose in January on the back of new orders and stronger demand that prompted companies to hire more. Read more

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Reporting by Alexander Marrow; Editing by Toby Chopra

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