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Russia's services sector returned to growth in June -PMI

A pedestrian walks past the windows of business premises put out for rent in Moscow

MOSCOW (Reuters) - Russia's service sector expanded last month for the first time since February, when Moscow sent tens of thousands of troops into Ukraine, a business survey showed on Tuesday.

The S&P Global Purchasing Managers' Index (PMI) rose to 51.7 in June from 48.5 in May - above the 50 mark that separates expansion from contraction for the first time in four months.

The survey showed a robust recovery in domestic demand across Russia's service sector, outweighing an ongoing fall in exports as international clients continue to turn away from the Russian market.

In March, the index fell to its lowest since the first wave of the coronavirus pandemic, hit by Western sanctions, currency volatility, surging inflation and a grim overall outlook for the Russian economy.

But new orders have bounced back quickly, rising at their fastest pace in a year in June, S&P Global said.

Cost pressures remained elevated but eased slightly, with the pace of charge inflation softening last month to its slowest since February 2021.

Sanctions imposed after Moscow launched what it calls its "special military operation" in Ukraine on Feb. 24, and foreign companies suspending operations, were still hurting the sector, with employment dipping and export orders falling again.

"Companies continued to reduced their workforce numbers, albeit at a slower pace, amid a further fall in backlogs of work," S&P Global said in a statement.

A sister survey last week showed similar trends in Russia's manufacturing industry, where output held steady, supported by strong domestic demand in the face of falling exports.

(Reporting by Reuters)