MNI Russia Business Sentiment Indicator: Russia Business Sentiment Falls Back Into Contraction- Perception Of Exchange Rate Sours As Rouble Pushes Up Prices

Executives on our panel of large Russian companies reported that business conditions had taken a turn for the worse in October as inflationary pressures flared up following the recent rouble depreciation. The MNI Russia Business Sentiment Indicator fell 8.9% to 48.3 in October from 53.0 in September, the lowest since April.
 
Of those surveyed, just 3.5% of companies reported that conditions had improved from the previous month, down from 15.5% in September while 89.5% reported that the business environment had not changed, up from 75% who did so previously.
 
Firms were far less positive in their assessment of the rouble exchange rate as the depreciation of the currency pushed up their costs, leaving them with little option but to raise the prices of their own goods and services.
 
While the rouble weakness did help to lift exports a little this month, the overall number of orders received by our panel dipped back into contraction in a sign that domestic demand remains subdued. 
 
Companies found that loans were harder to come by in October, despite managing to keep their financial position in the black. The Availability of Credit Indicator fell back into contraction to 49.0 after last month’s bounce back to 56.8 placed it at the highest level since June 2014; just one month prior to the imposition of capital restrictions.
 
Still, our panel were more upbeat about the next three months as the busy Russian holiday period approaches, with firms preparing for it by accumulating inventories and clearing backlogs. The Future Expectations Indicator rose 4.1% to 56.5 in October from 54.3 in September.
 
Commenting on the latest survey, Philip Uglow, Chief Economist of MNI Indicators said, “With business sentiment paring back sharply into negative territory, suggestions that the Russian economy has stabilised may prove premature. The central bank now finds itself between a rock and a hard place, with the general malaise in the business environment at odds with the renewed upward pressure on prices and a precarious currency.”

Download Full Report