MOSCOW (Reuters – Russia’s services sector experienced its worst contraction for over a year last November, as clients demanded a slower pace and export orders stagnated. A business survey revealed this on Friday.

IHS Markit’s Purchasing Managements’ Index (PMI), which was 48.8 in October and 47.1 in November, fell below the 50 threshold that distinguishes expansion from contraction. The index had dropped to 47.1 in November from 48.8 in October, its lowest point since Oct 2020.

Sian Jones (senior economist, survey compiler IHS Markit) stated that “domestic and foreign client demand declined as firms moderated the optimism regarding future output.”

The cost pressures have increased. Due to increased fuel and wage costs, input prices rose at their fastest rate in six months.

The November employment report was mostly unchanged after a small contraction the month before. But, there were signs of improvement in business confidence, which dropped to its lowest point since August.

Jones explained that it is unlikely that demand conditions will improve in the service industry until viral cases can be reduced and COVID-19 restrictions removed.

Additionally, she said that the obstacles to the improvement of vaccination rates could hinder the progress in the coming year.

Unrelated research showed Wednesday that Russian manufacturing activity increased marginally in November due to new orders growth.