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Russia services contraction eases in December but long downturn looms - PMI

MOSCOW (Reuters) - - The contraction in Russia's services sector eased slightly in December, a survey showed on Tuesday, but companies' business expectations fell to their weakest on record, pointing to a prolonged economic downturn.

The HSBC Purchasing Managers Index (PMI) for the services sector, which makes up about 60 percent of Russia's economy, rose to 45.8 last month from a 5-1/2-year low of 44.5 in November, still far below the 50 mark denoting growth.

"Business activity kept contracting fast at Russian service providers, driving the overall economic downturn. Business expectations in services fell to the lowest on record, not seen even during the 2008-09 crisis," said Alexander Morozov, chief economist for Russia and CIS at HSBC.

The decline reflected lower demand due to a storm of bad news for Russia including Western sanctions over the Ukraine crisis, a tumbling rouble and a near halving in the price of oil - Russia's main export. The rouble has lost more than 40 percent of its value against the dollar in 2014.

A similar survey on Monday showed activity in Russia's manufacturing sector fell for the first time in six months.

For the second month running, a greater proportion of firms expected activity to decline over the coming 12 months than those that forecast growth, the survey showed. The volume of incoming new business in the service sector also fell for the fourth successive month.

Morozov said there was a growing chance of a prolonged recession.

"The recession promises to be less severe (than in 2008-2009) but longer," he added.

(Reporting by Lidia Kelly; Editing by Hugh Lawson)