Russia's Services PMI growth softens in October

Russia's Services PMI growth softens in October
The latest PMI survey data signalled a weaker start to the final quarter of 2017 for the service sector but business activity still made increases
By bne IntelliNews November 3, 2017

Business activity in the Russian service sector increased solidly in October, despite the pace of growth dipping to a three-month low, according to the IHS Markit report of November 3.

This week the manufacturing Purchasing Managers' Index (PMI) also showed some growth in October, with both output and new orders for Russian manufacturing producers easing, but overall performance was the weakest since June.

The IHS Markit Russia Services Business Activity Index posted 53.9 in October, down from 55.2 in September, but still comfortably above the 50 point mark indicating expansion.

“The latest PMI survey data signalled a weaker start to the final quarter of 2017 for the service sector," Markit economist Sian Jones commented on October's numbers. 

The contraction of both the services and manufacturing indexes led the Russia Composite Output Index decline to 53.2 in October from 54.8 in September.

In the reporting month the panelists among Russian service providers attributed output growth to stronger client demand, larger client bases and greater overall client activity. 

Average cost burdens paid by Russian service providers increased further in October, albeit at the slowest rate for four months, according to Markit.

"Anecdotal evidence stated that greater costs were linked to higher raw material prices, which in turn stemmed from exchange rate fluctuations and increased demand at suppliers," the report reads.

Notably, business confidence among service providers remained robust in October, which was also attributed to greater client demand. The manufacturers, on the other hand, showed a lower level of optimism than in September.

“IHS Markit currently forecasts modest GDP growth of 1.8% year-on-year in 2017, supported by recoveries in demand conditions in both the manufacturing and service sectors,” according to the report, the outlook being below reaching the ambitious goal of over 2% short-term GDP growth set by the government.

 

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