MOSCOW (Reuters) - Russia's service sector contracted for a third straight month in December as the volume of new orders shrank, while business confidence fell to its lowest level in more than a year, a business survey showed on Thursday.
The Markit purchasing managers index (PMI) for the services sector rose to 49.5 from 47.1 in November but remained below the 50 mark that separates expansion from contraction.
"The sector has been particularly hard-hit by COVID-19 restrictions, especially those in consumer-facing industries," said Sian Jones, senior economist at survey compiler IHS Markit.
Weak demand from domestic and foreign clients led to spare capacity, resulting in a renewed contraction in workforce numbers, the monthly survey showed.
Cost burdens rose across the service sector, with higher input prices attributed to unfavourable exchange rates, rising fuel and salary costs as well as increased subcontractor fees.
The degree of confidence among service sector companies fell to its lowest since October 2020 although hopes for a recovery in client demand remained in place.
"Headwinds facing Russian private sector firms will be significant going into 2022, as high inflation, growing COVID-19 cases and weak demand threaten the near-term outlook," Jones said.