Russian service sector confidence slump

Russian service sector confidence slump
The service sector in Russia slowed down in December, and the industry’s expectations are at their lowest since the end of 2008.

The HSBC Services PMI eased in December, as its key Index of Services Business Activity was down to 53.8 points from 54.8 in November – the lowest during the last 4 months. The figure is also below the average for the entire 2011 (54.6), as well as the long-run survey trend of 56.6.

Output confidence was also down both in manufacturing and services, as The Composite Output Index eased during the month to 53.5 from 54.6.

New businesses both in manufacturing and services grew just marginally in December. However, the employment in both sectors was rising, growing the fastest since June.

Longer – term expectations for business activity, however, nosedived to its worst since December 2008.

“The most astonishing thing is that service providers have reversed their business outlook from very bullish to very bearish in just seven months,” comments Alexander Morozov, Chief Economist (Russia and CIS) at HSBC.

December’s weak outlook pointed to rising concerns over political uncertainty in Russia, as well as fears over prospects for the global economy, HSBC said in a statement.

“At present, service companies are trying to continue ‘business as usual’ and keep expanding their workforces at one of the fastest rates during the post-crisis cycle. Yet, the current, still benign rate of economic activity expansion may be prone to an abrupt fall if current business expectations come true. By and large, the downside risks for economic growth in Russia are mounting,” Morozov concludes.

A reading above 50 signals growth of activity compared with the previous month, while a figure  below 50 points to contraction.