Russian companies came under increasing pressure in February as they complained of diminishing credit lines and growing inflation pressures.
Sentiment among our panel of large Russian companies fell to the lowest level in the survey’s history. The MNI Russia Business Sentiment Indicator fell by 14.6% to 42.0 in February from 49.2 in January. Around three quarters of our panel thought that overall business conditions had not changed since January, while a record 22.5% of respondents reported that they had worsened.
Both New Orders and Production hit all-time lows, highlighting the weakness in the domestic economy. This also resulted in a further build-up of unplanned inventories at a record pace in February.
The one bright spot in the report was an increase in Export Orders to the highest since July 2014 helped by the weakness in the rouble.
Firms reported a further worsening in credit conditions. The Availability of Credit Indicator fell to the lowest level on record hit by a general tightening in lending and sanctions preventing companies from raising capital overseas. This had a knock-on effect to the Financial Position of our panel, causing it to fall below the 50 mark for the first time since the survey began in March 2013.
Input Prices hit an all-time high as the weakness in the rouble continued to filter through. Higher costs are clearly filtering down the supply chain with companies also raising prices of their own goods and services with the Prices Received Indicator hitting a new record high.
Commenting on the latest survey, Philip Uglow, Chief Economist of MNI Indicators said, “Russian companies are facing a torrid time with high inflation, high interest rates, weak demand, exchange rate volatility and a lack of credit all hurting. It’s little wonder that sentiment is at a record low.”
“The one glimmer of hope in our survey came from exporters who at last appear to be capitalising on the weaker exchange rate. Unfortunately this won’t be enough to stop Russia sliding into a deep recession this year.”
FTSE Mondo Visione Exchanges Index:
Russian Companies Face Credit Crunch - MNI Russia Business Sentiment Indicator Hits Record Low
Date 25/02/2015