Russian business sentiment contracted sharply in May to the lowest level since December 2013, as businesses felt the heat of the standoff with the west over Russia’s military intervention in Crimea.
The MNI Russia Business Indicator fell to 49.2 in May from 55.6 in April, to stand 11.5% below the level seen in May 2013. The decline in the indicator below the 50 expansion/contraction level suggests a considerable dent has been made in Russian business confidence from what have only been limited sanctions imposed by the US and the EU.
New Orders and Production fell further, although Export Orders managed to recover somewhat but still remained in contraction. Stock levels continued to contract but at a slower pace than in April.
While companies were still optimistic about their future financial position, the indicator measuring the financial health of our survey firms has trended down over three months and it hit a series low in May.
Commenting on the latest survey, Philip Uglow, Chief Economist of MNI Indicators said, “We had already seen some impact on the companies in our panel from the fallout in Ukraine, but this month’s fall into contraction shows it even more clearly.”
“Russia’s agreement to supply natural gas to China helps to diversify its trading partners. But while President Putin enjoyed his moment in the spotlight with President Xi of China, the vast majority of Russia’s trade lies with Europe and he’d be wise not to rattle their cage too much more.”
