Consumers are cooling off to services – Newspaper Kommersant No. 183 (7145) from 08.10.2021

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The service sector, which until recently showed the most dynamic rates of post-crisis recovery, moved to a decline in entrepreneurial confidence in the third quarter, according to Rosstat and the Higher School of Economics – although according to PMI Markit, activity was still marginally growing in September. The Central Bank notes that in September, incoming payments increased only in telecommunications and tourism, and in the latter case, primarily in terms of foreign travel. Analysts point out that without the growth of incomes of the population, one cannot count on an accentuated growth in demand for services.

The September survey of business activity in the service sector of the Center for Business Studies of the Higher School of Economics, based on the Rosstat’s business surveys of the heads of 5.8 thousand companies from 15 industries, shows a noticeable decrease in confidence and expectations. Compared to the second quarter, the business confidence index decreased by 6 percentage points (pp), to minus 5%. All its components showed negative dynamics; estimates of actual demand and the economic situation in companies decreased the most (see chart). Business sentiment has worsened in almost all types of services surveyed. The only exception was tourism, but after a slight increase, the indicator in the industry showed one of the lowest values ​​among all types of services (minus 8%). A favorable business climate with low positive index values ​​persists in the maintenance and repair of vehicles, as well as in insurance. In the forecast part of the index, the balance of demand expectations in the fourth quarter decreased by only 1 percentage point and remained positive (plus 7%), but the weight of the factor of economic uncertainty as an obstacle to development grew by 1 percentage point over the quarter, to 55% …

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The Central Bank also recorded a decrease in incoming financial flows in industries focused on consumer demand in September; among service industries, their insignificant growth was noted only in telecom and tourism. In the latter case, it is caused by “an increase in the number of international travel”. “At the same time, in the hotel industry, the growth of incoming payments in September was less pronounced. This indicates the anticipatory growth of outbound tourism after the opening of some massive foreign destinations, ”the regulator notes.

Note that back in August, the service sector, according to Rosstat, not only continued to confidently recover, but also kept the dynamics of all industries focused on consumer demand afloat (see Kommersant, October 4). In January-August 2021, in annual terms, the consumption of paid services increased by 19.2% – more than in other basic sectors of the economy. According to the Ministry of Economy, in August, the gap in the sector’s turnover from the pre-crisis level of August 2019 was only 0.8% against 2% in July, which was facilitated by the removal of a significant part of sanitary restrictions, a surge in deferred demand and the opening of some foreign tourist destinations.

The September services PMI, however, stood at 50.5 points, up from 49.3 in August, indicating a return to business growth on the back of stronger demand and new orders.

However, this growth rate was below average, and sales were negatively impacted by a slight reduction in new export orders from service providers, as well as a noticeable increase in costs, which led to an increase in selling prices. Expectations in the sector for the coming year have risen to a maximum since May 2019, based on the growth in demand, according to the Markit review.

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Georgy Ostapkovich, Director of the Center for Business Studies at the Institute for Statistical Studies and Economics of Knowledge at the Higher School of Economics, notes that salary increases and noticeable one-time September payments to pensioners, security officials and other categories of citizens can increase the real disposable income of the population by 3.1-3.3% compared to last year , but this only compensates for their losses in 2020 (3.2%). Even with a possible increase in disposable income in the current year, their overall level will be about 10% lower than 2013, and “it is extremely difficult to count on the accentuated economic growth of industries (services and retail), which mainly depend on final consumer demand,” – he concludes.

Alexey Shapovalov


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