Russian Services Unexpectedly Return to Growth on Better Outlook

  • Industry showed `modest growth' in September, Markit says
  • Business sentiment in services strengthens to 14-month high

Russian service industries from hotels and restaurants unexpectedly returned to growth, boosted by new business and the strongest business sentiment in 14 months, while prices continued to rise because of a weaker ruble.

The Russia Services Business Activity Index rose to 51.3 in September from 49.1 in August, according to a statement released Monday by Markit Economics. The median estimate of three economists surveyed by Bloomberg was for 49.5. The gauge has been above the 50 threshold that separates growth from decline in three of the past five months.

“Companies signaled a more upbeat assessment of future activity, with optimism strengthening to the best in over a year,” Paul Smith, senior economist at Markit, said in the statement. “The environment remains challenging, highlighted by continued underwhelming growth of new business and further job cuts.”

Russia is facing a two-year recession after an oil-price collapse last year weakened the currency, intensified capital outflows and spurred inflation. A deterioration in wages and incomes undercut consumer purchasing power, a growth driver for more than a decade.

The ruble has lost almost 40 percent against the dollar in the past 12 months, the worst performer among 24 emerging-market currencies tracked by Bloomberg. Consumer-price growth accelerated to 15.8 percent in August from a year ago, quickening for a third month.

Markit said the survey showed the fastest growth in output prices in seven months as service providers were able to raise their charges, linking the increase to the currency effects as well as higher fuel and utility bills. Companies cut jobs because of excess capacity, resulting in a 19th consecutive month of falling employment, according to the report.

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