MOSCOW (Reuters) – Activity in Russia’s service sector contracted in October for the second time in three months, hampered by weak client demand and this year’s first contraction in new orders, a survey showed on Wednesday.
IHS Markit’s Purchasing Managers’ Index (PMI) fell to 48.8 in October from 50.5 in September, below the 50 mark that separates expansion from contraction.
“A resurgence in virus cases hit the sector further as client demand weakened and new business fell for the first time in 2021,” said Sian Jones, an economist at IHS Markit, which compiles the survey.
Foreign demand returned to growth at the start of the fourth quarter, however, with new export orders up slightly.
Service providers registered a renewed decrease in employment as they sought to cut costs. Although only marginal, the fall in workforce numbers was the second in three months.
Inflationary pressures remained marked in October, with the pace of increase in input costs reaching a four-month high amid higher utility and supplier prices.
“We currently expect consumer prices to rise by 6.4% on the year in 2021, with the Bank of Russia hoping that their recent 0.75% increase in the policy rate will quell steep upticks in prices,” Jones said.
A sister survey showed on Monday that Russian manufacturing activity expanded in October for the first time since May, supported by faster growth in output and new orders but constrained by supply chain disruptions.
(Reporting by Anna Rzhevkina; Editing by Alexander Marrow and Catherine Evans)