Nov. 5 (Bloomberg) -- A gauge of Russian service industries from banks to telecommunications providers rose for a third month in October, advancing to the highest since September 2008 as orders rose and business confidence improved.

The Purchasing Managers’ Index rose to 54.3 last month from 53 in September, gaining for the ninth time in 10 months, VTB Capital said in an e-mailed statement released today. A reading above 50 indicates expansion. The gauge grew for the first time in 11 months in August.

“Activity accelerated due to rising new business and growing clientele in all sub-sectors except transport and storage,” Svetlana Aslanova, an analyst at VTB Capital in Moscow, said in the report. “ Being cautiously optimistic, we believe that the Russian services sector has embarked on a recovery path.”

Resurgent demand for commodities boosted the economy of the world’s biggest energy exporter after a record 10.9 percent slump in the second quarter. Services, which account for about 40 percent of the economy, are picking up after a stronger ruble made imports more affordable and the central bank cut its key interest rates eight times since April to the lowest on record.

The ruble added 3.5 percent against the dollar in October, recording its second consecutive monthly gain and rose to the strongest level against the euro since January.

Retail Revival

Retail sales in September rose 0.3 percent from August, growing for a fifth month after a 1.8 percent increase in August. Consumer confidence advanced in the three months ended September for a second consecutive quarter.

Retail sales will rise 5.3 percent next year, adjusted for inflation, as higher incomes allow consumers to boost purchases of food and other products, according to Renaissance Capital.

“The rates of new business expansion and outstanding workloads were broadly unchanged, which might imply the growth rate of business activity stabilizing in the future,” Aslanova said in the report.

Participants in the VTB survey reported the strongest degree of optimism since December 2006, with more than half the respondents expecting “higher activity” in the next 12 months, while 5 percent anticipate a slowdown, VTB said.

The telecommunications market will probably rise 6 percent a year through 2012, mostly on data services, Mikhail Shamolin, chief executive officer at OAO Mobile TeleSystems, the country’s largest mobile-phone company, said last month.

Economic Outlook

Moscow-based electronics retailer OAO M.video plans to open 10 to 20 stores next year after opening 15 through Oct. 21, while OAO Dixy Group, Russia’s third largest publicly traded food retailer, aims to open 65 to 70 shops this year and “at least” 100 stores in 2010.

The government forecasts the economy will grow 1.6 percent next year compared with a drop of 8.5 percent in 2009, the first contraction since Russia defaulted on its debt and devalued the ruble in 1998.

Russia emerged from its recession last quarter, Deputy Economy Minister Andrei Klepach said on Oct. 21 and his ministry estimates output may expand more than 2 percent next year.

Inflation in services industries eased last month, matching the third-slowest in the eight years VTB has compiled the survey, the bank said in the report.

Prices charged by companies in the sector fell in October, dropping at the sharpest pace on record, as demand remained weak, according to the report.

Russia’s inflation rate last month fell to the lowest in more than two years, dropping to 9.7 percent from 10.7 percent in September, the Moscow-based Federal Statistics Service said on Nov. 3.

VTB first compiled the survey, which is based on responses from about 300 purchasing managers, in October 2001.

To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net.

Last Updated: November 5, 2009 00:00 EST