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Business activity growth eases to ten-month low in April in Russia

Christian Fernsby |
April data signalled a moderate increase in business activity across the Russian service sector.

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The rise in output was the softest since June 2018.

Similarly, the rate of new business growth eased to a ten-month low.

In contrast, new export orders rose sharply and at the fastest pace since the series began around four-and-a-half years ago.

Less robust demand conditions were reflected in a slowdown in hiring, with employment rising only fractionally.

Business confidence, however, picked up and was the strongest since July 2011.

Meanwhile, the rate of cost inflation continued to ease following January's VAT-driven spike.

The IHS Markit Russia Services Business Activity Index – a single-figure measure designed to track changes in total Russian services activity – posted 52.6 in April, notably down from 54.4 in March.

The latest expansion in output was the slowest for ten months and below the long-run series average.

Where a rise was reported, panellists linked this to a further increase in new business.

Others, however, noted that softer demand conditions weighed on growth.

Russian service providers continued to register a rise in new business in April, albeit at the softest pace since June 2018.

The upturn was supported by new client acquisitions and an increase in marketing activity.

The modest expansion in new orders was in part driven by a sharp rise in new export business.

The rate of growth was the strongest since data collection for the series began in September 2014.

Despite a slower overall expansion in client demand, service providers recorded a stronger degree of optimism in future output growth.

Business expectations were at their highest level since July 2011, with confidence stemming from new product launches, forecasts of greater client demand and increased advertising.

Russian service providers registered only a fractional increase in employment in April.

The latest data extended the current sequence of job creation to seven months, but signalled the slowest rise in workforce numbers since last October.

Some panellists noted that a slowdown in new business growth had reduced pressure on capacity.

Backlogs of work continued to fall during April.

Although the contraction moderated, it extended the current sequence of decline to seventeen months.

Meanwhile, input cost inflation softened in April.

The rate of increase eased to the slowest for eight months.

The rate of output charge inflation, however, was broadly in line with that seen in March and its respective series trend.

Higher charges were attributed to the pass-through of greater cost burdens onto clients.

The pace of increase was among the fastest seen over the last four years, but well below January's peak.

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