The Markit Russia Services Business Activity Index rose to 56.6 in March from February's 3-month low of 55.5. Meanwhile, economists had expected the index to fall to 55.0. However, a PMI reading above 50 suggests growth in the sector.
Moreover, over the first quarter of the year, the index signalled the best pace of expansion since the fourth quarter of 2012.
The growth in overall activity was underpinned by higher volumes of new work on strong client demand and market activity.
Employment continued to rise in March, with the modest pace of expansion the fastest since August 2013.
On the price front, input prices faced by Russian service providers grew at the weakest pace since August 2010. Selling prices also rose at the slowest pace in five months.
The Composite PMI, which combines manufacturing and services, climbed to 56.3 in March from 55.4 in the prior month.
"The composite index figure for March reflected solid growth across both sectors, and quarterly data suggested the strongest performance since Q2 2008.
"IHS Markit forecast overall GDP growth of 1.0% in 2017. With employment and business activity showing improved trends in quarter one, this is a positive step towards a recovery," Sian Jones, Economist at IHS Markit, said.
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