Confidence returned to Russian companies in May as the rate cuts by the Central Bank of Russia and the recovery in the rouble brought about a considerable improvement to the business environment.
The MNI Russia Business Sentiment Indicator rose by 11.5% to 51.3 in May from 46.0 in April, bringing to an end eight consecutive months of contraction. Business confidence is now significantly above the record low of February, with the latest increase a further sign that this may prove to be a turning point.
Companies in the service sector were the sole driver of this month’s improvement, and were the most optimistic among the three sectors. Meanwhile, companies within the manufacturing and construction sectors reported that they were less satisfied with the current business environment but continued to remain positive overall.
Availability of Credit increased for the third consecutive month, pushing it into expansion for the first time since the introduction of capital restrictions in July 2014.
Both Production and New Orders increased modestly, building on gains in March and April, and pushing them both just above the 50 level in May.
Inflationary pressures continued to ease as the rouble appreciated further, with lower input costs enabling more companies to keep the prices of their own goods and services in check.
Commenting on the latest survey, Philip Uglow, Chief Economist of MNI Indicators said, “It is looking increasingly likely that February marked the low point for Russian businesses with sentiment, output and orders all pushing back above 50 in May. A weakening in inflationary pressures and an improvement in credit conditions should help businesses over the coming months.”
“Even though official inflation remains high, the continued weakness in the economy and the appreciation of the rouble provide room for the central bank to cut rates further, making a sizeable reduction in the key rate justified at the next meeting of the central bank on June 15.”
FTSE Mondo Visione Exchanges Index:
Confidence Returns To Russian Businesses - MNI Russia Business Sentiment Rises To 51.3 In May
Date 28/05/2015