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Russian services activity shrinks for third month running in Dec -PMI

Pedestrians walk across Nevsky Avenue in central Saint Petersburg

MOSCOW (Reuters) - Activity in Russia's services industry shrank for the third month running in December, a survey showed on Friday, as companies faced weak consumer demand at home, severe inflationary pressure and declining customer numbers.

The S&P Global Purchasing Managers' Index (PMI) for Russian services fell to 45.9 from 48.3 a month earlier, dropping further below the 50 mark that separates expansion from contraction.

Companies noted that the reduction in new business was due to economic uncertainty and a drop in purchasing power at clients amid severe inflationary pressures, S&P Global said in a statement.

Annual inflation is forecast at 5%-7% in 2023, down from this year's double-digit readings, but still above the central bank's 4% target.

Geopolitics has hit the services sector particularly hard, with Western sanctions against Russia over its actions in Ukraine compounding logistics problems for Russian firms.

Business confidence slumped in December, to 45.8 from 61.3 the month before.

"Global economic uncertainty and the impact of inflation on customer purchasing power reportedly dented sentiment markedly," S&P Global said. "The level of sentiment was at its lowest since March."

A sister survey on Thursday showed Russia's manufacturing activity expanded in December as domestic demand outweighed falling export sales, leading to the fastest monthly job creation in the sector in over 21 years.

(Reporting by Alexander Marrow; Editing by Hugh Lawson)