Russia’s Services Drop Points to Recession, HSBC Says

Russian services industries declined for a second month in April, contracting at the fastest pace since May 2009 as businesses including telecommunications and banks weakened, HSBC Holdings Plc said.

The Russia Services Business Activity Index dropped to 46.8 from 47.7 in March, HSBC said in a statement, citing data compiled by London-based Markit Economics. That was less than the median estimate of 48.8 in a Bloomberg survey of seven economists.

“The PMI survey respondents cite weak demand and economic instability as the main reasons for the weakening performance of their companies,” Alexander Morozov, HSBC’s chief economist for Russia and the Commonwealth of Independent States, said in the statement. “So far, there are not reasons to be optimistic on this front. Economic recession becomes the reality.”

Russia’s disagreement with the U.S. and the European Union over the crisis in Ukraine has prompted a selloff in the ruble, accelerating inflation and hurting consumer demand. Combined with HSBC’s survey of manufacturers, the report suggests Russia’s economy contracted at an annualized rate of 3 percent for the second consecutive month, according to Morozov.

The composite index for manufacturing and services businesses fell to 59-month low of 47.6 from 47.8 in March, HSBC said in the statement. Russia faces a fifty-fifty chance of recession over the next 12 months, according to a Bloomberg survey last month.

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