Finance
Russian services sector sees strongest growth in a year, VAT hike fuels inflation
Published by Global Banking and Finance Review
Posted on February 4, 2026
2 min readLast updated: February 4, 2026
Quick Summary
Russia's services sector experienced its strongest growth in a year, driven by increased demand and new orders, despite rising costs due to a VAT hike.
Russia's Services Sector Experiences Strongest Growth in a Year
Overview of Russia's Services Sector Growth
MOSCOW, Feb 4 (Reuters) - Russia's services sector expanded at its fastest pace in a year in January, buoyed by stronger demand and a rise in new orders, an S&P Global survey showed on Wednesday.
Drivers of Growth
The S&P Global Russia Services PMI Business Activity Index rose to 53.1 in January from 52.3 in December, marking a solid upturn in output. A PMI reading above 50 indicates growth in activity, while below 50 signals contraction.
Impact of VAT Increase
The sector's growth was driven by improved customer demand and successful advertising campaigns, leading to a third consecutive monthly rise in new business and the fastest in 12 months.
Employment Trends
However, the recent increase in the value-added tax has significantly pushed up costs, with input prices rising at the sharpest rate in two years.
Business Confidence Levels
"Operating expenses rose markedly as supplier prices increased in response," the report noted.
Consequently, the rate of charge inflation accelerated to its highest since August 2023 as firms passed on higher costs to clients.
Employment in the services sector saw a renewed increase after a decline in December, though job creation was minimal. The rise in employment was attributed to greater new order inflows.
Despite the challenges posed by inflationary pressures, business confidence improved, reaching a four-month high, with firms optimistic about greater activity in the coming year due to increased advertising and new service lines.
However, the degree of optimism remained below the series average.
(Reporting by Gleb Bryanski; Editing by Joe Bavier)
Key Takeaways
- •Russia's services sector grew at its fastest pace in a year.
- •The S&P Global Russia Services PMI rose to 53.1 in January.
- •VAT increase led to the sharpest rise in input prices in two years.
- •Employment in the services sector saw a minimal increase.
- •Business confidence improved, reaching a four-month high.
Frequently Asked Questions about Russian services sector sees strongest growth in a year, VAT hike fuels inflation
1What is VAT?
Value Added Tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale.
2What is inflation?
Inflation is the rate at which the general level of prices for goods and services is rising, eroding purchasing power.
3What is GDP?
Gross Domestic Product (GDP) is the total monetary value of all goods and services produced within a country's borders in a specific time period.
4What are employment trends?
Employment trends refer to the patterns and changes in job creation, hiring, and workforce dynamics within an economy or sector.
