Russia’s private sector entered deeper contraction in September, as both services and manufacturing activity declined, according to the latest PMI data published by S&P Global.  (chart)

The Composite Purchasing Managers’ Index fell to 46.6, down from 49.1 in August, marking the steepest drop in output since late 2020 and the fourth consecutive month of overall decline.

“The reading reflected a fourth consecutive monthly decline in manufacturing and the steepest drop in services activity since December 2022, signalling the quickest fall in private sector activity in almost three years,” S&P Global reported.

The downturn was led by the service sector, where the Business Activity Index dropped to 47.0 from 50.0 a month earlier, slipping below the no-change threshold of 50. “The solid decrease in services output was driven by the sharpest decline in new orders since December 2022,” the report noted. “Subdued client demand and another monthly decrease in new services orders reportedly weighed on activity levels.”

Manufacturing remained under pressure, though continued military-related production provided some limited support. The Manufacturing PMI declined to 48.2 in September from 48.7 in August.

Across both sectors, firms cited lower purchasing power and reduced customer numbers as primary factors behind the downturn. “Contributing to the fall in output was a third successive monthly decline in new orders during September. The pace of contraction accelerated to the fastest since the closing month of 2022,” S&P Global said.

Despite weakening demand, service providers expanded their workforce. “Although the downturn in new sales was sustained, Russian service providers continued to take on additional workers in September,” the survey reported. “The rate of job creation was solid overall and quickened to the sharpest since January 2024.”

Firms also reported a renewed fall in backlogs. “Russian services firms recorded the first depletion of incomplete business in 11 months at the end of the third quarter. The decrease in work-in-hand was strong overall and the steepest since December 2022.”

Cost pressures intensified, with higher supplier, wage, and utility expenses driving input prices to rise at the sharpest rate in five months. However, firms exercised restraint in passing costs onto customers. “Despite a faster rise in cost burdens, output charges were hiked at a softer pace at the end of the third quarter,” S&P Global said. “Service sector firms stated that, although they sought to pass on higher costs to customers via an increase in selling prices, competition and efforts to boost sales were taken into consideration.”

Amid the downturn, sentiment remained cautiously positive. “Russian service providers remained upbeat regarding the year-ahead outlook for output in September,” the report said. “The degree of confidence picked up from August but was below the series trend. Optimism was reportedly linked to hopes of greater stability in economic conditions and a rise in customer numbers.”