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3 Mar, 2010 10:55

VTB Capital Services PMI shows growth weakening

VTB Capital Services PMI shows growth weakening

VTB Capital’s Russia services PMI index for February has indicated continued weak growth for the sector.

Coming in at 51 for the month after 51.9 in January, the survey marked the seventh consecutive month of improvement. Readings higher than 50, in the survey which is compiled from a monthly survey of purchasing executives, indicate improvement.

The report declared that although the services sector continued its expansion, the pace of that expansion is weakening.

"PMI data from VTB Capital showed that the recovery in Russia's service sector lost further momentum in February. An overall improvement in business conditions was signaled, but it was the weakest over the current seven-month sequence of expansion. Total business activity rose, but new business fell for the second month running. This resulted in a sharp drop in backlogs and the fastest workforce contraction since last October,"

VTB Capital analyst, Svetlana Aslanova added inflationary pressures on the sector are weakening, but that the weak growth was supporting further job cuts.

"In February, VTB Capital's Russian Services PMI index declined further, to 51.0 (from the 51.9 posted in January), indicating a slower expansion of the sector on the back of the ongoing contraction in new orders. In addition, the future activity index declined as the slowdown in the sector's growth reduced panelists' [those surveyed] optimism. The only moderate increase in business activity supported further job shedding. Meanwhile, panelists mentioned higher energy and utilities costs as major drivers of input price growth, although the rate of price inflation declined considerably. Still, the increase in prices charged was largely muted as competition was still high,"

According to VTB, the survey indicated that service providers were less optimistic in February than they had been in January, but that most firms expect activity to grow over the coming year.