Russia’s services sector returned to contraction in March, as weaker demand weighed on activity despite a modest improvement in business confidence, according to data published by S&P Global on April 3.  (chart)

The seasonally adjusted S&P Global Russia Services PMI Business Activity Index fell to 49.5 in March, down from 51.3 in February, signalling a renewed decline in output after five months of expansion.

Separately, Russia’s manufacturing sector also remained in the red, with the Purchasing Managers’ Index falling to 48.3 in March from 49.5 in February. S&P Global said this “signalled a modest decline in the health of the sector”, adding that the downturn was “the strongest in 2026 so far” as demand weakened and output fell.

The combined picture also deteriorated. The S&P Global Russia Composite PMI Output Index declined to 48.8 in March from 50.8 in February, indicating a renewed contraction in overall private sector activity. The fall was broad-based, with a drop in manufacturing new orders outweighing broadly stable demand in the services sector.

Within services, March data indicated the first decline in output for six months, albeit only slight. Firms linked lower activity levels to more muted demand conditions, with new business intakes broadly stable following a four-month period of growth. While some companies reported higher customer numbers, others cited falling client purchasing power, increased uncertainty and lost work linked to the war in the Middle East.

Cost pressures remained elevated across the sector. Input prices rose sharply, driven by higher raw material and supplier costs, as well as the continued pass-through of January’s VAT increase. Although inflation rates eased for a second consecutive month, they remained among the fastest recorded since early 2025. Selling price inflation also moderated but stayed historically elevated, reflecting firms passing higher costs on to customers.

Employment in the services sector declined for a second consecutive month, with the pace of job losses accelerating to its steepest level since January 2023. Companies attributed workforce reductions to cost considerations amid subdued demand.

Despite weaker activity, firms reported a continued rise in backlogs of work, though the rate of accumulation slowed. Business confidence improved from February, supported by expectations of new work and potential customer growth, but remained among the lowest levels recorded in over three years.