MNI Indicators: Russian companies a bit happier but loans harder to get

By Andrei Skvarsky.

Russian companies were slightly more upbeat about the overall business environment in their country in August than they had been in July despite the plunge in oil prices in recent months, according to surveys by Deutsche Boerse-owned intelligence company MNI Indicators.

Yet this appears to be a fragile improvement, the findings of the August survey suggest.

First of all, the poll preceded “the China-led global equity and commodity rout which may well dampen sentiment next month”, an MNI Indicators statement quoted the firm’s chief economist, Philip Uglow, as saying.

Furthermore, the majority of respondents – MNI Indicators interviews executives at manufacturing, service, construction and agricultural firms in the course of its monthly surveys – said access to credit had become more limited after months of improvement.

The ruble’s depreciation ratcheted up inflationary pressures and pushed up input costs for companies, making them raise their own prices.

Moreover, companies anticipated business conditions to worsen over the coming three months, with their outlook standing at the lowest since December 2013. The findings of June’s survey showed expectations for the next three months to have reached a 22-month high.

MNI Indicators expressed the surmise that companies’ shrunken access to credit was partially the result of the slowdown in China. The greater market volatility most likely made Chinese banks more cautious about lending, the company argued.

On a positive note, the ruble’s decline, though it meant higher input costs, was welcomed by companies in anticipation that it would boost demand for Russian goods abroad and encourage import substitution.

“While the sharp fall in the oil price has no doubt hurt a number of companies in our panel, on aggregate business confidence continued to trend higher in August and is now significantly up from the February trough,” said Uglow.

“Our survey period closed before the China-led global equity and commodity rout which may well dampen sentiment next month. Already businesses were becoming less optimistic about the coming months and weaker oil prices and the rapid depreciation in the rouble threaten to derail the recovery.”

In its monthly surveys, MNI Indicators asks respondents whether they believe a particular business activity has increased, decreased or remained unchanged compared with the previous month, for instance if they think production has been higher, lower or unchanged month-on-month, and what their expectations are for the next three months.

Executives at about 200 companies listed on Moscow Exchange are questioned in each poll.

The returns underlie updates of the MNI Russia Business Sentiment Indicator, an index where levels above 50 represent the predominance of perceived positive developments, those below 50 mean the majority of respondents made negative assessments, and the 50 mark means no perceived change.

August’s indicator was 52.3 compared with July’s 51.3.

The polls, run since March 2013, consist of computer-aided telephone interviews (CATI).

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