By Andrei Skvarsky.
A survey by Deutsche Boerse-owned research company MNI Indicators suggests that overall sentiment among Russian businesses was slightly lower in July than in June and their near-term economic outlook had declined significantly but that, just as previous surveys indicated, optimists outnumbered pessimists.
The returns of July’s survey, the latest of monthly polls of Russian company executives by MNI Indicators launched in March 2013, appear to confirm a surmise by the research firm’s chief economist, Philip Uglow, that Russia’s economic slowdown may be past its worst, according to an MNI Indicators statement.
Uglow, who first voiced this tentative conclusion this spring, believes the country’s economy hit rock bottom in February and has been slowly recovering since then.
Though borrowing costs had gone down, the MNI Russia Business Sentiment Indicator, an index based on the polls, slid by 1% to 51.3 in July from 51.8 in June, returning to May’s level (levels above 50 mean the predominance of optimistic responses over pessimistic ones).
Companies were much gloomier in their near-term outlook than they had been in June, with the Future Expectations Indicator, part of the MNI Russia Business Sentiment Indicator, falling by 13.2% month-on-month, MNI Indicators said.
The research company largely attributes this to the recent extension of European Union sanctions against Russia but believes that the low oil prices were also a factor.
On the positive side, both costs incurred by companies and prices they charged fell to the breakeven 50 level. MNI Indicators interpreted this as a sign that inflation had peaked.
The weakening of the rouble over the past month was seen as a positive development by businesses. It did not affect their operations in July, whereas it had caused them pain during the previous nine months, the statement said.
Credit was easier to obtain although the central bank’s latest rate cut apparently failed to push general sentiment up.
“Sentiment was broadly flat over the month… Importantly, most of the key indicators remained in expansion and are significantly higher than the lows seen in February. We take this as an early sign of stabilisation and recovery in the Russian economy,” said Uglow.
“Subsiding inflationary pressures, meanwhile, provide the central bank with room to further normalise monetary policy at its meeting later this month, with a rate cut of 50 basis points the most likely outcome by our reckoning.”
MNI Indicators’ monthly polls are computer-aided telephone interviews with executives at about 200 Russian companies that are a mix of manufacturing, construction, service and agricultural firms, and are listed on Moscow Exchange.
Respondents are asked whether they believe a specific business activity has increased, decreased or remained the same compared with the previous month, and what their expectations are for three months ahead.
The MNI Russia Business Sentiment Indicator levels are results of the processing of the responses. Levels above 50 show perceived expansion, those below 50 represent perceived contraction and those of 50 mean no perceived change.