Russia’s Service Activity Decline: A Cause for Concern?

According to Markit Economics, Russia’s service PMI (purchasing managers’ index) has been declining gradually since November 2017. It fell to 55.1 in January 2018 from 56.8 in December 2017, missing the market expectation of 56.

The decline in Russia’s service PMI in January was mainly due to the following:

• production output and volumes rose at a slower rate
• new orders improved at a slower rate
• weaker client demand hampered export orders
• employment in the service sector fell to a five-month low

Crude oil price improvement mainly helped Russia’s manufacturing activity in January 2018. However, the service sector’s performance was weaker due to a slowdown in client orders. However, Russia’s business confidence index rose to the highest level seen since July 2011.

The iShares MSCI Russia Capped ETF (ERUS), which tracks the performance of Russia’s economy (RSX), rose 10.1% in January 2018. Similarly, the VanEck Vectors Russia Small-Cap ETF (RSXJ) rose 4.6%. In the next part of this series, we’ll analyze Brazil’s manufacturing PMI in January 2018.