Business activity in Russia’s private sector showed signs of stagnation in April, with services growth flatlining and manufacturing output continuing to decline, according to the latest Purchasing Managers’ Index (PMI) data released by S&P Global. (chart)

The seasonally adjusted S&P Global Russia Services PMI Business Activity Index held steady at 50.1 in April, unchanged from March and just above the 50 no-change benchmark, signalling broadly stagnant conditions in the services sector at the beginning of the second quarter.

Service providers reported near-stalling levels of new orders as weaker customer purchasing power limited demand. “Although some firms noted sustained increases in new business, others mentioned that softer demand conditions dampened overall activity,” S&P Global stated in its report.

The services result comes on top of a similar result from manufacturing which is in the red, but showed a slight improvement in April. The Russian manufacturing sector continued to contract, with its PMI up slightly to 49.3 in April from 48.2 in March. While this indicates a slower pace of decline, it marked the second consecutive monthly deterioration in operating conditions. “The latest figure suggests the overall downturn was marginal,” the report said.

Taken together, the composite measure of private sector output across both manufacturing and services rose modestly, with the S&P Global Russia Composite PMI Output Index increasing to 49.8 in April from 49.1 in March. However, this still indicated a fractional contraction in overall business activity, primarily driven by declining manufacturing production.

Despite subdued performance, services firms remained broadly optimistic. “Business expectations were positive in April, with the level of optimism rising to the highest since January 2024,” the report noted, adding that confidence was supported by plans for investment in new service lines and outreach to new clients.

Employment in the services sector returned to growth after a brief contraction in March, as firms responded to increased backlogs of work. “Higher staffing levels were reportedly in response to previous expansions in new orders and resulting pressure on capacity,” S&P Global said.

Cost pressures picked up but remained historically moderate. Input price inflation accelerated for a second month, largely due to higher raw material, repair, and wage costs, though it remained below the long-run series average. Selling price inflation was also subdued, marking the second-slowest rise in a year.

The largely stagnate services and manufacturing sectors come as the Russian economy is clearly cooling and actually contracted for the first time since 2022 in the first quarter in real terms, although nominal growth was up 1.7% y/y.

The Central Bank of Russia (CBR) set a policy in place last year to deliberately slow growth as a way of bring down sticky inflation, however, with the results in the first quarter worse than expected analysts are now asking if Russia’s economy is headed for a soft or a hard landing.