The MNI Russia Business Indicator declined by 4.0 points to 47.5 in September from 51.5 in August, the lowest level this year, as sanctions by the EU and US continued to limit companies’ access to foreign capital markets.
It was the second time that the indicator has fallen into contraction this year, previously in May at the height of the Ukraine crisis. Economic sanctions hit firms’ ability to raise capital abroad, causing the Availability of Credit Indicator to fall to a new record low in September.
Business activity was also hit in September with New Orders slipping to the lowest since December 2013. While Export Orders posted a slight improvement in September, they remained in contraction following the implementation of Tier 3 sanctions. A fall in the rouble to a record low of 38.5 against the US dollar will support Export Orders over the coming months.
Production also eased, while the negative business climate saw firms choosing to continue running down their inventories.
Inflationary pressures picked up slightly in September with the Prices Received Indicator increasing for the second consecutive month. Still, both Prices Received and Input Prices remain well below levels seen earlier in the year and provide some hope that consumer price inflation will be kept in check.
Commenting on the latest survey, Philip Uglow, Chief Economist of MNI Indicators said, “Once again firms reported that their availability of credit has been further curtailed in the wake of sanctions that have cut their access to credit markets.”
“Fresh economic sanctions against Russian state- owned oil companies were announced at the end of our survey period. Given the significance of the energy sector to the Russian economy, it is possible that we will see a further weakening in business sentiment next month.”