Russia's service sector contracted for a second consecutive month in April as weak demand, falling new orders and deteriorating client finances weighed on business activity, while the manufacturing sector extended its downturn to an eleventh straight month — painting a picture of an economy under sustained structural pressure that an oil revenue windfall has so far failed to reverse. (chart)

The S&P Global Russia Services PMI Business Activity Index registered 49.7 in April, marginally up from 49.5 in March but still below the 50.0 no-change threshold that separates expansion from contraction.

New orders fell for the first time in five months, with panel members citing financial difficulties among customers as the primary driver. Employment was reduced as companies chose not to replace voluntary leavers in an effort to cut costs. Business confidence fell to its lowest level since December 2022.

Input prices rose at a marked pace during April, driven by higher supplier costs and ongoing adjustments to the recent VAT hike in January, though the pace of inflation was the softest recorded in 2026 to date – a major success that is a result of CBR governor Elvia Nabiullina’s unorthodox experiment to reduce inflation by slowing economic growth. Output charges also increased at their slowest rate this year.

Composite picture

The S&P Global Russia Composite PMI — which combines service and manufacturing sector data — posted 49.1 in April, a slight improvement from 48.8 in March but remaining in contraction territory for the second consecutive month.

New orders fell across both sectors simultaneously — the second straight monthly decline — while employment fell for a third month running. Both input cost and output charge inflation eased further from January's VAT-driven highs, though both remained elevated.

Manufacturing: eleven months of decline

The detail in April's manufacturing data is the most significant news as the real economy is hurting more than the services sector.

Russia's manufacturing PMI fell to 48.1 in April from 48.3 in March — the lowest reading recorded in 2026 and an eleventh consecutive month of contraction. Production declined again as companies attributed weaker output to subdued demand and falling new order inflows. A sharper drawdown in manufacturing work-in-hand pointed to a deepening rather than stabilising trend.

S&P Global said that "Russian manufacturing firms signalled a further contraction in operating conditions during April," with the downturn linked to falling production, new orders and employment. Although manufacturing firms were more optimistic than services about the year-ahead outlook, that optimism was insufficient to offset the downward pressure on activity.

The result is consistent with the broader industrial data for the year. Russia's industrial production fell 0.9% y/y in February after a 0.8% decline in January.

RosStat data suggested a modest rebound in March, but April's PMI reading does not support any sustained recovery in manufacturing conditions. Eleven months of sub-50 readings represent the longest manufacturing contraction Russia has experienced since the early post-invasion period in 2022.

The data underscores a recurring tension in Russia's wartime economic narrative. Oil revenues nearly doubled in March to $19bn thanks to spiking prices, providing significant fiscal relief. Yet the PMI surveys — which capture real-time business conditions across thousands of individual firms — show that windfall has yet to feed through into a boost in economic activity. The civilian sector is contracting, business confidence is at multi-year lows and employment is being shed. Nabiullina said this month that Russia is facing its worst labour crisis in modern history after the unemployment rate fell to 2.1%. The oil windfall is feeding the budget, but it is not yet feeding the businesses.