The seasonally adjusted S&P Global Russia Services PMI Business Activity Index registered 52.3 midway through the third quarter, up from 51.1 in July the consultant reported on September 4. (chart)

“The latest data indicated a moderate expansion in output at Russian service providers, and one that was the quickest since January. Greater activity was commonly linked to stronger client demand and an associated upturn in new business,” S&P Global said.

Services performed better than the seasonally adjusted S&P Global Russia manufacturing PMI, which slowed to 52.1 in August, down from 53.6 in July, as Russia’s economy is cooling after the main military Keynesianism effects driving growth begin to wear off.

Taken together the S&P Global Russia composite PMI posted 52.1 in August, up slightly from 51.9 in July, still comfortably above the 50 no-change mark.

“The expansion [in the composite index] was the fastest in five months despite a much slower upturn in manufacturing production. A stronger rise in new business supported output growth, with the increase in new sales broad-based by sector,” S&P Global said.

Russia is on course to grow by 3.5-4% the Central Bank of Russia (CBR) said in its most recent macroeconomic survey, however, it also forecasts that growth will slow sharply in 2025 as the various structural problems caused by the heavy military spending start to take effect.

In August, Russia's service sector experienced stronger growth despite a slowdown in the goods-producing industries, according to the latest S&P Global PMI® survey. Demand continued to improve, driving new business and prompting companies to increase hiring. Employment saw its sharpest rise since January as service providers responded to higher business requirements by expanding their workforce. This enhanced capacity helped firms reduce their backlogs for the fifth consecutive month, with the sharpest decrease since early 2023.

Input costs and output prices for both goods producers and service providers rose at a slower pace compared to July. Although inflationary pressures eased, service providers continued to face cost burdens driven by rising supplier prices and wage increases. Nevertheless, the rate of inflation in output charges softened to its slowest since April as firms passed some of these costs onto customers.

Business confidence in the service sector improved, reaching a three-month high. Companies are optimistic about future activity, with expectations driven by plans to expand their client base, increase advertising efforts, and invest in recruiting and training additional staff. This positive sentiment, coupled with strong demand and ongoing new business growth, positions the sector for further expansion in the coming months.