Russian Services Industry Surges in July at Fastest Since 2013

  • Markit Services gauge rose to 55, beating forecasts in survey
  • Stronger consumer demand can propel the economy from recession

Russian services from restaurants to hairdressers grew faster than forecast last month, rising at the sharpest pace in more than three years as new business prompted companies to hire more people for the first time since February 2014.

The Russia Services Business Activity Index rose to 55 from 53.8 in June, remaining above the threshold of 50 that separates contraction from growth for a sixth month, according to a statement released Wednesday by Markit. That was better than every forecast in a Bloomberg survey of six analysts, whose median estimate was for 52.9.

“The stabilization of backlogs ended a five-and-a-half-year period of decline and contributed to renewed job growth and stronger business confidence,” Markit economist Samuel Agass said in the statement. “Growth looks likely to remain over the coming months and continue to support the total upturn in Russia’s private sector.”

Stronger demand to start the third quarter and a pickup in consumer spending, the biggest part of the economy, would bode well for Russia as it looks to break out of its longest recession in two decades. Consumption has crumpled in the past two years after weathering blows from a spike in inflation, a weaker ruble and the crash in oil prices.

The Micex Consumer Goods & Services Index has been little changed in 2016, underperforming the broader Micex Index, which is up 8.6 percent. The ruble has gained more than 10 percent against the dollar this year, the second-best performer among its emerging-market peers tracked by Bloomberg.

While services companies added workers in July, the increase in staffing levels was “only slight,” Markit said. In what could be a concern for the central bank, the rate of growth in selling prices and output charges quickened to the highest in months, a reflection of “strong inflationary pressures in the economy.”

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