The seasonally adjusted IHS Markit Russia Services Business Activity Index jumped to a seven-month high of 55.8 in March, up from 52.2 in February, the consultants said in a press release on April 4.
“The March PMI data indicated a faster rise in business activity across the Russia service sector. The upturn in output was the strongest since August 2020 and largely driven by a quicker increase in new orders,” Markit said. “The expansion in client demand came from both domestic and foreign customers, as new business from abroad rose at the sharpest pace since October 2019. Price pressures remained historically elevated, however. Cost burdens rose at the steepest rate since the VAT hike in January 2019, with firms seeking to pass on higher input prices to customers through a sharp rise in charges.”
The uptick in services follows on from a slow expansion of the manufacturing PMI released the previous week that showed a slowing in March, but still registered 51.1, down slightly from 51.5 in February, but still above the 50 no-change mark.
Combined, the IHS Markit Russia Composite PMI Output Index posted 54.6 in March, up from 52.6 in February, to signal the steepest rise in private sector business activity since August 2020.
The service sector has been badly hurt by the coronacrisis but as the infection rates in Russia plummet and life slowly returns to normal the sector is enjoying a strong bounce-back. Service providers boosted their workforce numbers at the fastest pace since November 2019 amid greater new sales.
March data indicated a solid rise in new business across the Russian service sector. The expansion was the fastest since August 2020, with panellists stating that greater demand from existing clients, alongside the acquisition of new customers, supported sales growth.
At the same time, foreign client demand ticked higher. The upturn in new export orders was the first in over a year and the sharpest since October 2019. Some companies noted that the rise was linked to the release of new products and business lines.
Cost burdens faced by Russian service providers increased markedly in March. The rise in input prices was often attributed to higher supplier costs amid shortages and delays, and unfavourable exchange rate movements. Moreover, the rate of cost inflation was the fastest since January 2019, the period immediately following the hike in VAT.
As a result, companies raised their selling prices at a sharper rate at the end of the first quarter. Stronger demand conditions also allowed firms to pass on a greater proportion of the increase in cost burdens to clients. The rate of charge inflation was steep overall and the quickest since the opening month of 2019.
Finally, service providers were strongly upbeat in their expectations regarding business activity over the coming year, despite confidence easing to a three-month low. Optimism was attributed to hopes of a substantial economic recovery once coronavirus (COVID-19) restrictions are lifted.