A gauge of Russian services slumped the most since records began in 2001 in the latest sign that the economy of the world’s biggest energy exporter is falling into a deep recession. The Purchasing Managers’ Index for Russia’s service sector plunged to 12.2 in April, down from 37.1 in March, IHS Markit reported on Thursday. The median estimate of eight economists surveyed by Bloomberg was for 28.
“The sudden shock to business operations became blatantly apparent in April, as new order inflows dried up and firms cut employment at the sharpest rate in the series history,” Sian Jones, an economist at IHS Markit, said in a report.
The data follows a similar slump in manufacturing and warnings from top government officials that financial pressure is mounting. Economic activity contracted by a third since lockdowns were enforced across most of the country at the end of March, Economy Minister Maxim Reshetnikov said at a government meeting on Wednesday. Despite more than five weeks of lockdown, Russia reported more than 10,000 new infections for the fifth straight day on Thursday, lifting the total number of cases to more than 177,000. President Vladimir Putin urged officials on Wednesday not to rush in lifting the self-isolation regime and Moscow Mayor Sergei Sobyanin said it is too early to start thinking about reopening the service sector.
What Our Economists Say:
“The lockdown has left very few services companies unscathed. Industry might see light at the end of the tunnel, but reopening is still a distant prospect for much of the economy.”
–Scott Johnson, Bloomberg Economics
The economic pain is weighing on Putin’s approval ratings, which dropped to a record low last month. Unemployment is expected to jump and nearly half of the respondents in a Bank of Russia survey published Wednesday said their financial situation is deteriorating. The International Monetary Fund forecasts a 5.5% contraction in Russia this year, roughly double the global drop.