Russia’s services PMI was back into the black in July, rising to 51.1 points against 47.6 points in June and above the 50 no-change benchmark, S&P Global reported on August 5. (chart)

"The seasonally adjusted S&P Global Russia Services PMI Business Activity Index registered 51.1 at the start of the third quarter, up from 47.6 in June. The latest data signalled a renewed expansion in output, and one that was the fastest since March. Higher business activity was linked by firms to stronger demand conditions and greater new order intakes," the report said.

The result follow on from manufacturing PMI score of 53.6 in July, down slightly from 54.9 at the end of the second quarter that signalled a solid but softer upturn in manufacturing sector.

Combined, the composite PMI score was 51.9 in July, up from the 49.8 in June as the recovery in the services sector lifted the composite PMI back into the black.

"Supporting the upturn in activity was a return to new business growth in July. Following a marginal contraction in June, new orders rose at the quickest pace since April amid reports of new client wins and greater customer referrals. The rate of expansion was only marginal and well below the long-run series average, however."

Russian service providers experienced a return to output growth in July, buoyed by stronger demand conditions. Business activity rose for the first time in three months, with new orders increasing slightly amid an improved sales environment. Firms attributed higher business activity to stronger demand conditions and increased new order intakes.

“Higher business activity was linked by firms to stronger demand conditions and greater new order intakes,” the survey noted.

Russia is enjoying something of a consumer boom as, despite the high inflation, consumers real disposable incomes expanded by more than 9% in July to their highest level in a decade as the war in Ukraine pushes up wages.

Despite a dip in business optimism to its lowest in a year, companies continued to hire additional workers, with the rate of job creation accelerating. Unemployment has fall to a post-Soviet low of 2.6%. Increased workloads prompted firms to hire both full- and part-time staff, with the rate of job creation reaching its highest since March and remaining historically elevated.

"Following a marginal contraction in June, new orders rose at the quickest pace since April amid reports of new client wins and greater customer referrals," the survey found. However, the rate of expansion was marginal and below the long-run series average.

Russian service providers saw a fourth consecutive monthly decline in backlogs of work, although the pace of depletion slowed to the weakest in this sequence. The slight drop in incomplete business was attributed to sufficient capacity, though some firms noted that increased new orders placed pressure on their ability to meet requirements.

Meanwhile, cost burdens for Russian services firms surged in July, with input price inflation accelerating to the fastest pace since January. The increase in operating expenses was attributed to hikes in supplier costs and wage bills. Consequently, businesses raised their selling prices at a sharper rate at the beginning of the third quarter, passing higher costs onto customers. The rate of charge inflation was the steepest in six months.

"Businesses raised their selling prices at a sharper rate at the start of the third quarter," the survey stated, noting that firms often cited the pass-through of higher costs to customers.

Despite a decline in business optimism for the second consecutive month, confidence among Russian service providers remained positive in July. The sentiment was driven by hopes for stronger demand conditions and efforts to attract new customers.

"Business confidence among Russian service providers remained upbeat in July. Positive sentiment was driven by hopes of stronger demand conditions and efforts to attract new customers," the survey concluded, although noting that the degree of optimism dipped to the lowest in a year.