Russia’s services sector remained in expansion territory in September, with the S&P Global Russia Services PMI Business Activity Index at 51.3, unchanged from August and marking a second consecutive month of growth. (chart) 

The latest survey from S&P Global (NYSE: SPGI) suggests that Russia’s service economy has stabilised after a weak period earlier in the year. Output was supported by rising new business and successful marketing campaigns, although the pace of expansion remained modest and below its long-term average.

Manufacturing continued to move in the opposite direction. The S&P Global Russia Manufacturing PMI rose to 49.8 in September from 48.8 in August, indicating that the contraction in factory activity eased substantially but did not disappear. A reading below 50 indicates contraction, while one above 50 signals expansion.

Taken together, the two surveys left Russia’s private-sector economy barely in growth territory. The Russia Composite PMI Output Index rose to 50.8 in September from 50.6 in August, pointing to only a marginal expansion in overall business activity.

The surveys reinforce evidence that the Russian economy has slowed sharply after several years of rapid growth. According to Rosstat, GDP expanded just 0.6% year on year in the first half of 2026. Economists surveyed by the Bank of Russia in September expect growth of only 0.5% for the full year, after GDP expanded 1% in 2025.

Services return to modest growth

Russian service providers recorded a second successive monthly expansion in activity in September, although the 51.3 headline reading was unchanged from August.

Companies linked the increase in activity to higher new orders and successful marketing campaigns. New sales continued to rise as stronger demand and new customer wins supported business, with the rate of new-order growth accelerating to its fastest since February.

Nevertheless, the increase was only fractional and remained weaker than the survey’s historical average, suggesting that the rebound in services remains fragile.

The employment picture also remained soft. Service companies reduced workforce numbers again in September, although the pace of job shedding eased to its weakest in four months and was only marginal overall.

Companies frequently attributed the reduction in employment to the non-replacement of voluntary leavers, rather than large-scale redundancies.

There was also some evidence that the deterioration in companies’ order books was levelling off. After five consecutive months in which backlogs of work contracted, the level of outstanding business was broadly unchanged in September.

Some companies reported rising unfinished orders as new business increased, although others said they continued to have sufficient spare capacity to process incoming work.

Business expectations remained positive. Services companies said planned investment in new technology, increased marketing and hopes of stronger customer demand supported expectations that activity would increase over the coming 12 months.

However, confidence slipped from August and moved further below its long-term average, highlighting continuing uncertainty about the strength of the recovery.

Inflationary pressures also eased.

Input costs continued to rise, driven principally by higher utility, transport, fuel and material prices, but the rate of increase was the slowest recorded so far in 2026.

Service companies also continued to increase the prices they charged customers as they attempted to pass higher operating costs through to clients. But output-price inflation slowed to its weakest rate in three months and remained below its historical trend.

Manufacturing remains in contraction

Conditions in Russian manufacturing remained more difficult, although September brought a significant moderation in the downturn.

The manufacturing PMI improved to 49.8 from 48.8 in August, leaving the index just below the 50-point threshold separating expansion from contraction.

Both output and new orders fell for a second consecutive month, as manufacturers continued to report weak demand. Companies attributed lower sales mainly to higher prices and increased competition.

The decline in total new business eased compared with August, but foreign demand weakened sharply. New export orders fell at their fastest rate since May 2022, one of the clearest signs of pressure in the September survey.

Manufacturing output also contracted for a second month, although the pace of decline eased from August.

Factories continued to reduce employment. September marked the tenth consecutive month of falling manufacturing headcounts, with job losses accelerating to their fastest pace since May.

As in the services sector, companies frequently said they were not replacing employees who left voluntarily.

Backlogs of work also continued to fall as new orders declined, although the rate at which manufacturers depleted outstanding business was the slowest in six months.

Cost pressures remained significant but showed signs of easing. Manufacturers reported higher supplier prices and unfavourable exchange-rate movements, while the cost of imported goods also contributed to rising operating expenses.

Input-price inflation remained historically elevated but slowed from August to a three-month low.

Manufacturers continued to raise their own selling prices in an effort to pass higher costs on to customers, although factory-gate inflation slowed to its weakest pace since June and was slightly below its historical average.

Supply-chain conditions deteriorated at the same time. Transportation delays and logistics problems led to the sharpest lengthening of suppliers’ delivery times since October 2024, with the deterioration in vendor performance more pronounced than the survey’s historical trend.

Companies also cut purchasing as weaker order inflows reduced production requirements. Input buying declined at the fastest pace since April, with some manufacturers deliberately drawing down inventories rather than purchasing additional materials.

Both pre-production stocks and finished-goods inventories consequently fell.

Despite the weakness in current conditions, Russian manufacturers became more optimistic about the next 12 months in September. Companies cited hopes of an improvement in demand and efforts to attract new customers as reasons for expecting production eventually to recover.

The combination of a still-expanding services economy and an industrial sector close to stabilisation kept the overall Russian private sector on the growth side of the PMI divide in September. But with the composite index at only 50.8, the surveys suggest that underlying economic momentum remains weak.