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Russia services activity grows at slowest pace in 10 months -PMI

Customers sit at tables in Parka Bar in Moscow

(Reuters) - Activity in Russia's services sector grew at its slowest pace in 10 months in November, a business survey showed on Tuesday, as new domestic and export business growth eased and firms grappled with stretched workforces and inflation pressures.

The S&P Global Purchasing Managers' Index (PMI) for Russian services fell to 52.2 in November from 53.6 in October, but stayed above the 50 mark that separates expansion from contraction for the 10th consecutive month.

"The rate of growth eased notably amid a slower uptick in new business," S&P Global said in a statement. "Firms continued to expand employment, however, due to sustained pressure on capacity."

Russia is grappling with a shortage of labour, in large part due to conscription and emigration linked to Russia's February 2022 invasion of Ukraine.

Survey respondents noted the strain on capacity as new orders increased and backlogs of work accumulated faster in November.

Price rises have also been a problem for Russian consumers and the central bank this year. The bank is widely expected to hike rates by 100 basis points to 16% at its next meeting on Dec. 15.

"The pace of inflation (in November) was historically elevated as greater wage bills and supplier price increases put pressure on cost burdens," S&P Global said.

That led to hikes in selling prices, although the increases overall were the slowest since May as firms sought to remain competitive and as customers showed resistance to further increases in prices, the survey showed.

Surveyed firms maintained elevated expectations for future output, with the degree of optimism at its second-strongest since April 2019.

(Reporting by Alexander Marrow; Editing by Susan Fenton)