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Will Russia Be Resilient amid Political Woes and Oil Dependence?

PART:
1 2 3 4 5 6 7 8
Part 7
Will Russia Be Resilient amid Political Woes and Oil Dependence? PART 7 OF 8

Russian Service Sector Activity Fell in June but Is Still Strong

Service sector activity in Russia

Business activity in Russia’s (ERUS) service sector continued to increase in June but at a slower pace than the previous month. The Markit Services PMI (purchasing managers’ index) in Russia (EEM) dropped to 55.5 in June 2017 as compared to 56.3 in May 2017. Let’s look at the services PMI for the last year in the below chart.

Russian Service Sector Activity Fell in June but Is Still Strong

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Russian services PMI in June 2017

The Russian (RUSS) services PMI has seen 17 straight months of expansion in the services sector as of June 2017. However, the pace of growth was the weakest in June 2017 since February 2017. The new orders saw the smallest increase of the last 11 months, but they remained in line with the long-run average. The increase in new orders reflects the rise of client activity and stronger demand as of June 2017.

Employment in the service sector

The staffing levels increased for six consecutive months among the firms in the service sector in June 2017. However, the pace of growth remained slower since February 2017. Meanwhile, backlogs increased for the first time since March 2017. The price pressures remained weak as the cost of inputs eased to relatively weak rates compared to historical trends, according to the July Markit report. The out prices also increased at a slower pace in line with long-term averages in June 2017. However, the output prices weakened from May’s 20-month high to a three-month low in June 2017.

Expectations

The service sector activity in Russia (RSX) in 2Q17 remained strong, but was slightly slower than in the first quarter, as per the July Markit report. Business confidence continued to be robust, as it extended to 17 consecutive months of expansion as of June 2017.

Future output expectations and robust underlying client demand as of June 2017 have supported optimism. Markit forecasts GDP growth of about 1.5% in 2017. However, the sluggish manufacturing performance recently is expected to be a drag on its economic expansion in 2017.

Let’s look at business confidence in Russia in June 2017 in our next article.

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