MNI Russia Business Sentiment Indicator: Russia Business Sentiment Plummets To Record Low - Orders Slide As Seasonal Demand Fails To Materialises

The MNI Russia Business Sentiment Indicator tumbled 23.2% to 37.1 in November from 48.3 in October, the lowest since the survey began in March 2013.

Demand and output collapsed in November with New Orders falling to a record low and Production down to the lowest since February, in spite of the approaching festival season. Given that the fall in headline sentiment was significantly greater than the actual drop in output and orders signals that other factors also hurt sentiment this month.

One of those factors was an increasingly negative assessment of the exchange rate, even though rouble weakness helped to keep export orders in the black. It is also possible that the downing of a Russian passenger plane in Egypt following Russia’s involvement in the war in Syria may have had some impact on sentiment.

Of those surveyed, 30.8% of companies reported that the business environment had deteriorated on the month, considerably above the 7% who did so in October, while 64.1% reported that the business environment had not changed. Construction companies led this month’s downturn in sentiment, while both manufacturing and service sector firms were also more dissatisfied with the current business environment. 

In the wake of the slowdown, companies depleted inventories at the fastest pace for more than a year, indicating that they do not anticipate any respite in the near-term. Firms also considered the size of their workforce to be surplus to their requirements, suggesting higher unemployment could be on the horizon.

While fewer of our panel were hit with higher costs this month, more of them chose to hike their own prices after having previously being reluctant to pass them on given the fiercely competitive environment.
Commenting on the latest survey, Philip Uglow, Chief Economist of MNI Indicators said, “Business sentiment fell at an alarming pace in November as orders plummeted and production fell sharply. And having remained insulated for so long, the survey showed evidence that the downturn was finally being seen in the labour market, with the employment component hitting the lowest in two years.”

“Prior to the recent downing of a Russian jet in Turkey, relations with the west had appeared to be thawing. EU sanctions had been set to expire in January, although media reports have suggested diplomatic sources point to a six-month extension, a further blow for Russia.”

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