News Column

Russia Service Sector Continues To Contract In July

August 4, 2014

MOSCOW (Alliance News) - Service sector activity in Russia continued to contract in July, though at a less-than-expected rate, the results of a survey by Markit Economics and HSBC Bank showed Tuesday.

The HSBC service sector business activity index fell slightly to 49.7 in July from 49.8 in June. Economists had expected the index to come in at 49.5.

This marked the fifth consecutive month of decline in service sector activity. A reading below 50 indicates contraction in activity.

However, the HSBC composite output index, which combines service sector and manufacturing activity, rose to 51.3 in July from 50.1 in June, the highest reading in 2014. The increase was driven by a solid increase in manufacturing activity that was reported last week.

New orders in the service sector increased in July, though at a marginal rate. Subsequently, outstanding work continued to fall sharply.

Job shedding increased at the fastest rate since September 2009 in the service sector.

Meanwhile, business expectations improved to the highest level in five months, but remained historically weak.

In the private sector, employment levels declined for the thirteenth successive month in July.

On the price front, inflationary pressures remained subdued in July. Input costs rose at a slower rate in the service and manufacturing sectors and output price inflation slowed to a five-month low.

"Russia's economy extended its modest recovery into July, the HSBC Russia Composite PMI signals. The pick-up was primarily lead by manufacturing, while services activity stagnated." Artem Biryukov, Economist at HSBC, said.

"The improvement of manufacturing activity last month doesn't look sustainable to us amid weak export demand on the back of geopolitical tensions. Indeed, we mainly attribute the manufacturing output upsurge to a temporary adjustment of production activity after substantial de-stocking in the previous months."

"The July results probably don't accumulate in full the respondents' reaction on the Western sanctions against Russia, imposed by the EU and the US in end-July." he added.

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Source: Alliance News

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