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Russia Service Sector Continues To Contract In December - Markit

Russia's service sector contracted further in December, but at a slower pace than in the previous month, the results of a survey by Markit Economics showed Tuesday.

The seasonally adjusted HSBC services business activity index rose to 45.8 in December from a 5-1/2 year low of 44.5 in the previous month. Economists had forecast a score of 44.0 for the month. A reading below 50 suggests contraction in the sector.

The December reading still represented a sharply deteriorating trend in service actor activity.

The HSBC composite output index dropped to a seven-month low of 47.2 in December from 47.6 in November.

Business expectations in the service sector sank to the lowest on record in December. Companies linked pessimism to economic instability, inflation, a difficult investment climate and the impact of sanctions.

On the price front, input price inflation accelerated for the fifth month running to the highest level since May 2008 due to a weakening ruble. Output price inflation marked a record high during the month.

The volume of new contracts received dropped at the strongest rate since May 2009. New business in the service sector fell sharply in December and new orders in the manufacturing sector also declined for the first time in six months, although marginally.

Firms reduced their staffing levels for the eighteenth month running in December and the rate of job shedding accelerated to the fastest Since August 2009.

Commenting on the data, Alexander Morozov, Chief Economist, Russia, CIS & The Baltics at HSBC, suggested that the probability of a deep recession in Russia in 2015 has increased.

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