Russia’s services sector shrinks amid western sanctions over Ukraine
Russia’s services sector has suffered the worst slump in activity since the Covid-19 pandemic hit in 2020 as consumers and businesses cancelled orders amid increasingly severe western sanctions after the invasion of Ukraine.
A closely watched business survey showed that new orders during March dived as restrictions on imports and exports began to bite and inflation raised the price of services at the fastest rate on record.
The S&P Global purchasing managers’ index (PMI) collapsed to 38.1 in March from 52.1 the previous month, sliding well below the 50 mark that separates expansion from contraction.
While businesses in the survey did not mention the Russian invasion of Ukraine and the impact of sanctions, domestic manufacturers and services firms cited “greater economic and geopolitical uncertainty” for the dramatic reversal of fortunes last month.
The US government cranked up the pressure on Monday, stopping the Russian government paying holders of its sovereign debt more than $600m (£457m) from reserves held by US banks.
Oil, inflation-sensitive bond yields and stocks edged higher on Tuesday as global financial markets anticipated another round of sanctions from western governments. The new sanctions could be announced on Wednesday, according to France’s European affairs minister.
The home rental firm Airbnb confirmed on Tuesday that it would be among many services firms to pull out of Russia after an announcement of its intentions last month.
It said guests would no longer be able to make new reservations and those starting on or after 4 April had been cancelled.
Inflationary pressures soared across the services sector to register arecord rise in prices charged to consumers, which followed a rise in production costs that was
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