By Andrei Skvarsky.
Monthly surveys by Deutsche Boerse analysts suggest that in November Russian companies had much gloomier feelings about the general business conditions in Russia than for a long time before.
The MNI Russia Business Sentiment Indicator, an index based on the returns of the surveys – polls by MNI Indicators, an intelligence company forming part of the Deutsche Boerse group, of executives at about 200 Russian companies representing various industries – tumbled by 23.2% between October and November.
This was the lowest point since MNI Indicators launched its surveys in March 2013, the intelligence firm said in a statement.
The Russian business community’s sentiment about the business environment in the country has been a roller coaster ever since, but practically none of MNI Indicators’ polls that followed the eruption of the Ukrainian crisis early in 2014 had recorded a fall so deep, with the Business Sentiment Indicator dropping by a record of 14.6% after the February 2015 survey.
The statement said 30.8% of the companies that were represented in November’s survey and were a mix of manufacturing, service, construction and agricultural firms, just as those represented in preceding polls, felt that the business environment had deteriorated on the month, compared with October’s level of 7%, though 64.1% had the impression the environment had remained unchanged.
Companies were getting fewer orders in November than any of the previous polls suggested, and production was down to the lowest point since February in spite of the approaching festival season.
Companies were also disposing of their stock at the fastest pace for more than a year, the London-headquartered intelligence firm said, arguing that this meant they anticipated no near-term improvement.
They were, moreover, considering personnel cuts, which meant higher unemployment could be on the horizon.
Fewer companies were hit with higher costs in November, the statement said. However, more of them chose to hike their own prices after having previously avoided this in a bid to be more competitive.
The fall in sentiment was a lot greater than that in output and orders, according to the returns of the survey. This signalled there also were other factors behind the bleaker sentiment, MNI Indicators argued.
The statement said one of those factors was increasing dissatisfaction with the ruble’s exchange rate, “even though ruble weakness helped to keep export orders in the black”.
Possibly one more factor, according to MNI Indicators, was the downing of a Russian airliner in Egypt in a bombing that was a presumed act of Islamist vengeance for Russia’s involvement in the war in Syria.
The survey predated Turkey’s shooting down of a Russian warplane in the area of the Turkish-Syrian border late in November.
The returns of the poll appear to defy cautious surmises by some economists that Russia is past its worst in the economic woes that have been besetting the country for the past couple of years.
“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,” the statement quoted MNI Indicators chief economist Philip Uglow as saying.
“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.”