5 Jun 2018 10:46

Russian services business activity growth remains strong in May - IHS Markit

MOSCOW. June 5 (Interfax) - Russian services business activity growth remained strong in May, PMI data from IHS Markit indicate.

May survey data signalled a strong increase in business activity, IHS Markit said in a press release. "That said, the expansion was weaker than in April. Similarly, the rate of growth in new business was down from those seen at the turn of the year, but remained substantial. Reflective of a slightly weaker increase in client demand, backlogs continued to contract and the latest upturn in employment was the slowest in 17 months. Meanwhile, price pressures remained steep, with the rate of input cost inflation the second-fastest since August 2016," IHS Markit said.

The IHS Markit Russia Services Business Activity Index - a single-figure measure designed to track changes in total Russian services activity - posted 54.1 in May, down from 55.5 in April. Readings above 50 signal growth in business activity while readings below that point to decline.

The latest survey data signalled the twenty-eighth consecutive month of increased output levels. "Despite business activity growth softening to below the long-run series average, it remained strong. Panellists attributed the expansion to greater demand from new clients," IHS Markit said.

The IHS Markit Russia Composite Output Index (covering both manufacturing and services) posted 53.4 in May, down from 54.9 in April. The latest overall upturn in output was solid, but weaker than the average in the current 28-month sequence of expansion.

"In line with the acquisition of new clients, new business received by service providers increased strongly. Although the rate of expansion matched the long-run series average, it was weaker than those seen that the start of the year. Unlike their service sector counterparts, manufacturers signalled only a fractional expansion in new orders in May," IHS Markit said.

"Operating capacities showed no sign of strain in May despite new business growth outstripping that of output. Backlogs contracted for the eighth time in the last nine months, with the rate of depletion accelerating from that seen in April. Anecdotal evidence suggested the fall was due to more efficient business processes. Manufacturing firms also indicated a fall in outstanding business. The rate of contraction accelerated and was solid overall," it said.

"Reflective of weaker pressure on capacities, service sector firms increased their payroll numbers only fractionally. The rate of job creation softened for the third successive month and was the weakest in the current 17-month sequence of expansion. For the fifth time in the last seven months, employment levels contracted in the manufacturing sector.

Input prices continued to rise in May, placing strain on profit margins. The rate of inflation in the service sector was the second-fastest since August 2016 and marked overall. Where an increase in costs was reported, panel members largely linked this to higher wages and fuel prices. Goods producers also reported a marked rise in costs, with the rate of input price inflation accelerating to the fastest since September 2015.

Meanwhile, service providers' output charges increased further in May. Although the rate of inflation eased from April's 38-month high, it was solid and quicker than at any other point since August last year. Panellists stated that greater charges stemmed from higher input costs, which were partly passed through to clients. Similarly, manufacturing output charge inflation softened from April's recent high. That said, the pace of increase was strong nonetheless.

Business confidence among services firms remained strong in May, despite dipping below the long-run series average. Expectations towards company performance over the coming year were driven by a sustained upturn in business activity and hopes of more favourable market conditions. Manufacturers signalled a similar degree of confidence in the outlook for output for the coming year. Although the level of optimism dipped to a five-month low, it was robust overall," IHS Markit said.