29 Dec 2018 13:49

Russian services sector sees solid rise in business activity in Dec - IHS Markit

MOSCOW. Dec 29 (Interfax) - The Russian services sector saw a solid rise in business activity in December, IHS Markit said in a press release.

The IHS Markit Russia Services Business Activity Index - a single-figure measure designed to track changes in total Russian services activity - posted 54.4 in December, down from 55.6 in November but nonetheless indicating a solid expansion in business activity across the Russian service sector. The increase in output was attributed to greater new order inflows from both domestic and foreign clients. The final quarterly average for 2018 was the strongest in a year, despite the latest data signaling the slowest rise in business activity in four months.

Index readings above 50.0 points indicate growth in business activity, while those of less than 50.0 show a decline.

"December data signaled a solid rise in business activity across the Russian service sector, supported by a sharp expansion in new business. Foreign client demand picked up, with the rate of new export growth accelerating to a series peak. Despite a further fall in outstanding business, firms raised their workforce numbers at a faster pace as expectations towards future output improved to the second highest since February," IHS Markit said.

"Meanwhile, input price inflation remained marked overall, although the rate of output charge inflation dipped to a three-month low," it said.

"New business continued to increase at a sharp rate in December, with the pace of growth easing only slightly from that seen in November. The expansion was faster than the series trend and was reportedly linked to new client wins. The rise in new export orders was strong overall, amid greater new order volumes from both new and existing clients. The upturn in new business from abroad was in fact the quickest since data collection began in September 2014," IHS Markit said.

"In line with a sustained rise in new business, Russian service providers noted a stronger increase in workforce numbers in December. The rate of job creation picked up to an eight-month high amid greater business requirements," it said.

"Backlogs of work contracted for the thirteenth successive month in December. The fall in outstanding business was solid overall and faster than the series trend despite softening from November.

Input price inflation eased for the second month running in December. Nevertheless, Russian service providers continued to register a marked rise in cost burdens overall. Where operating expenses rose, panelists attributed this to higher wage and energy costs.

Consequently, firms sought to partly pass greater cost burdens on to clients through higher output charges. The rise in selling prices was solid overall, but the rate of inflation dipped further below the series average.

Finally, business confidence across the Russian service sector improved in December. Expectations of further rises in new business and a sustained increase in output reportedly drove higher positive sentiment. The degree of optimism was the second-strongest since February and robust in the context of the series history," IHS Markit said.

Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices. Weights reflect the relative size of the manufacturing and service sectors according to official GDP data.

The Russia Composite Output Index is a weighted average of the Russia Manufacturing Output Index and the Russia Services Business Activity Index. The Composite Output Index posted 53.9 in December, down from 55.0 in November. Despite growth easing to a three-month low, the quarterly performance was still the best in a year. Expansion in output across both the manufacturing and service sectors remained solid overall.

"New business received by private sector firms increased strongly in December. Growth in both the manufacturing and service sectors eased slightly but remained robust," IHS Markit said.

"Encouragingly, employment continued to rise across both the manufacturing and service sectors. Although the rate of job creation softened among goods producers, the increase in workforce numbers accelerated in the service sector.

On the price front, input cost inflation eased in December. The pace of increase dipped to a nine-month low in the manufacturing sector, but remained marked. Output charge inflation also slowed, most notably among manufacturers who were encouraged to adopt competitive pricing due to an increase in firms in the market.

Manufacturers and service providers alike registered a stronger degree of business confidence in December. The overall level of positive sentiment was one of the highest since the series began in 2012," IHS Markit said.