11 Jan 2010 14:09

Russia's services sector grows for 5th month in row in Dec

MOSCOW. Jan 11 (Interfax) - The business climate in Russia's services sector continued to improve in December for the fifth month running, with the IMS-Service index ticking up a tenth of a point month-to-month to 53.4 points, even though that was lower than the record average of 56.8 points, a statement from VTB Capital says.

The IMS-Service index is based on monthly surveys among some 300 companies in Russia's services sector and snapshots the overall sector situation. A figure above 50 points indicates that activity has increased over the previous month, a figure lower than 50 that activity has slowed.

"Strengthening overall growth [in December] was generally the same as the growth posted in November, although new-business growth slowed to non-significant. Despite the weakening increase in new orders, the drop in the amount of uncompleted work slowed, and the business mood relative to forecasts of overall business activity in the coming twelve months improved. Nevertheless, the impact of inflation on company expenditures increased," the bank's statement says.

"Growth continued in the Russian services sector in December. The IMS-Service index was virtually unchanged from November at 53.4 points versus 53.3 points a month earlier, holding at above the 50-point mark for the fifth month in a row, serving as a 'watershed' between decline and growth. Against improving market conditions, the index of economic expectations among services-sector representatives reached the highest level since November 2006," Senior Corporate Analyst at the bank VTB Europe Svetlana Aslanova said about the research results.

"However, the sub-index of business activity slipped to a three-month low while the volume of new orders increased, but only very slightly. The profitability sub-index almost reached the neutral 50-point mark thanks to companies in the sector increasing prices for their services for the first time in three months, which offset the growth in expenses. A sharp rise in cost prices was reflected in a rise in the corresponding sub-index, which reached its highest point since February 2009. A moderate increase in the number of new orders did not lead to increased employment in the sphere of services, and the corresponding sub-index was virtually unchanged from November, again signaling a slight drop in the number of jobs," Aslanova said.

VTB Capital, a subsidiary of Russia's VTB, is a British bank registered in Britain and Wales that operates in Britain and Singapore and is a member of the London Stock Exchange.