Page 57 - RusRPTJan21

than the previous official estimate of 55,000.
Service slowdown due to crisis
The latest services headline figure signalled a modest decline in business activity at Russian service providers in December. Anecdotal evidence suggested that the fall in output was due to subdued client demand and a further contraction in new sales, reports Markit.
“December PMI data signalled a further downturn in business activity across the Russian service sector. The pace of contraction remained only moderate, as the decline in new business eased,” Markit said in a press release. “At the same time, the rate of input price inflation was the second-fastest since March and marked overall. Despite weak client demand, firms partly passed on higher costs through the quickest rise in charges since April 2019. Meanwhile, output expectations improved to a four-month high amid hopes of an end to the pandemic.” Service sector firms registered a third successive decrease in new business at the end of 2020, but the rate of decline softened to its slowest in the aforementioned sequence and was only moderate overall, according to Markit.
Similarly, the rate of contraction in new export sales eased from that seen in November. Foreign client demand remained notably weak, however, as new business from abroad fell at a pronounced pace.
Inflation has also spiked in the last quarter of 2020 and is expected to end the year at circa 4.8%, well over the Central Bank of Russia's (CBR) target rate of 4%.
“Russian service providers registered a substantial rise in cost burdens again during December. Although the rate of input price inflation softened from that seen in the previous survey period, it was still the second-fastest since March,” Markit reports. “The marked rise in cost burdens was often linked to supplier price hikes and unfavourable exchange rate movements.” The ruble sharply devalued over the summer due to a combination of the oil price shock in March and growing geopolitical risk of new harsh sanctions from the new Joe Biden US administration, which is now feeding through to push up inflation.
At the same time, selling prices rose at an accelerated pace despite customer demand falling further. The solid increase was commonly attributed to the partial pass-through of greater costs to clients. Moreover, the pace of charge inflation was the quickest since April 2019, says Markit.
But the prospects of a vaccine-induced snapback in 2021 continue to buoy confidence in the service sector, and firms were more upbeat regarding the outlook for output over the coming 12 months in December.
57 ​RUSSIA Country Report​ January 2021 ​ ​www.intellinews.com