7 May 2018 11:58

Russia sees strong service sector business activity growth in April - IHS Markit

MOSCOW. May 7 (Interfax) - Russia sees strong service sector business activity growth in April, IHS Markit said in a research note.

"April survey data signalled a strong rise in business activity across the Russian service sector. Moreover, the rate of expansion accelerated from March's eight-month low. New business also increased at a quicker rate. That said, the pace of job creation softened to a three-month low. Meanwhile, inflationary pressures intensified. Rates of both input price and output charge inflation accelerated markedly and reached multi-year peaks," 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 55.5 in April, up from 53.7 in March, and indicated a strong output upturn. The latest data extended the current sequence of expansion that began in February 2016, and growth was faster than the long-run series average. Anecdotal evidence suggested the rise was due to greater new order volumes from new and existing clients. The IHS Markit Russia Composite Output Index (covering both manufacturing and services) posted 54.9 in April, up from 53.2 in March.

"The latest overall increase in output was strong and driven by faster expansions in both the manufacturing and service sectors. New business received by Russian service providers continued to increase in April, with the pace of growth quickening from an eight-month low in March. Panellists attributed the rise in new orders to greater client demand and the acquisition of new customers. Similarly, new orders rose at an accelerated pace in the manufacturing sector, albeit only marginally overall," IHS Markit said.

"The level of outstanding business in the service sector was broadly unchanged in April, reflecting both output and new orders expanding at the same pace. Where a fall in backlogs was reported, respondents linked this to more efficient business processes. Others noted that the latest upturn in new orders led to pressure on capacity and a greater amount of work-in-hand. Manufacturers indicated a marginal contraction in backlogs in April, with the rate of decrease moderated to the weakest in the current eight-month sequence of decline," it said.

"Meanwhile, services employment growth softened in April. Although still solid overall, the rate of job creation eased to a three-month low. A number of panel members stated that the rise in staff levels stemmed from greater business requirements. Meanwhile, staff numbers in the manufacturing sector increased for the first time so far in 2018.

Inflationary pressures intensified in April, with rates of both input price and output charge inflation accelerating. Moreover, the rise in cost burdens was the quickest since December 2015 and marked overall. Panellists attributed higher input prices to greater wage and raw material costs. Less favourable exchange rates also reportedly pushed up the price of imported goods. Reflecting the trends seen by their service sector counterparts, manufacturers also signalled a marked rise in input costs. The rate of inflation accelerated to the fastest since September 2015.

Charge inflation in the service sector also reached a multi-year high in April. The rate of increase was the fastest in over three years and sharp overall. Panel members widely noted that higher charges stemmed from increased input costs being partly passed on to clients. At the same time, goods producers registered the quickest rise in output prices for over two-and-a-half years.

Business confidence among services firms towards future activity was robust in April. The degree of confidence increased from March and was one of the strongest in the last six years. Optimism was attributed to a sustained upturn in new orders. Positive sentiment also improved among manufacturers. Moreover, the degree of optimism rose to the highest since May 2015," IHS Markit said.