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Russian service sector activity expands for first time since Sept

MOSCOW (Reuters) - Russia's service sector returned to growth for the first time in five months in February, a business survey showed on Friday, as client demand and new business increased, boosting firms' optimism for the year ahead.

The S&P Global Purchasing Managers' Index (PMI) for Russian services posted 53.1 for February, climbing from 48.7 a month earlier and moving above the 50-mark which separates expansion from contraction.

The sector has been under intense pressure since Russia sent tens of thousands of troops into Ukraine last February in what it calls a "special military operation", but is now showing signs of improvement.

"The rise in business activity was linked to stronger client demand, the acquisition of new customers and greater interest from clients amid reduced uncertainty," S&P Global said in a statement.

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"The increase in output was the first since September 2022, with the rate of expansion the second-fastest since July 2021."

A controversial mobilisation drive announced last September, which saw more than 300,000 Russian men drafted to the armed forces and hundreds of thousands flee abroad to avoid being conscripted, has sapped domestic consumer confidence and hampered the struggling services sector in recent months.

But buoyed by February's uptick in client demand, firms also resumed hiring, with employment expanding for the first time since last July, albeit only at a fractional pace, S&P Global said.

Input prices rose at their slowest pace since August, easing cost pressures, which contributed to the highest level of positive sentiment since July.

"Optimism generally stemmed from the development of new services lines, the acquisition of new customers and hopes for further upticks in client demand," S&P Global said.

A sister survey on Wednesday showed that activity across Russia's manufacturing sector expanded at its fastest rate in six years in February, driven by upticks in production and new sales, while higher input costs added to inflationary pressures.

(Reporting by Alexander Marrow; Editing by Toby Chopra)