Financial Position Worst On Record As Sanctions Squeeze Credit - MNI Russia Business Sentiment Indicator Rises To 49.2 In January From 47.3 In December

Business sentiment among our panel of Moscow Exchange-listed companies was boosted by seasonal demand in January but remained in contraction as sanctions, low oil prices and the depreciation in the rouble all weighed on confidence.
 
The MNI Russia Business Indicator rose by 4% to 49.2 in January from 47.3 in December. In spite of the improvement in sentiment, 60% of our panel thought that overall business conditions had not changed since December, while around one-fifth of respondents reported that they had worsened.
 
Companies reported that credit availability had been squeezed to a record low due to the Western capital restrictions, bringing the total fall since January 2014 to 30%. This had a knock-on effect on the financial position of companies, which deteriorated to the worst level in the survey’s history.
 
Businesses continued to view the weaker currency as helpful, with the Effect of the Rouble Exchange Rate Indicator improving in January. The weaker rouble, however, pushed up costs for companies, with Input Prices hitting a series high in January. Consequently, this  prompted companies to raise the prices of their own goods and services.
 
Exporters found the exchange rate to be more favourable as it helped to lift Export Orders, while the Russian New Year holiday helped boost domestic New Orders. Nevertherless, Inventories rose to a record high as the expansion in Production outstripped the more moderate improvement in demand.
 
Commenting on the latest survey, Philip Uglow, Chief Economist of MNI Indicators said, “While this was the second consecutive month that business sentiment has increased, it remains depressed. Weak demand has put upward pressure on stock levels while sharply higher inflationary pressures will likely depress activity further.”
 
“A junk credit rating will add to the woes of large Russian companies who are already finding it difficult to service their existing debt, whilst the threat of additional sanctions threatens to cause the financial situation to deteriorate further.”