The MNI Russia Business Indicator declined by 1.7%to 46.7 in October from 47.5 in September, the lowest level this year, as the weak rouble took its toll on business sentiment.
Firms were hurt more than ever before by the exchange rate after the rouble declined to a fresh low against the US dollar during our survey period, with the Effect of the Rouble Exchange Rate Indicator falling to a series’ low in October. While the depreciation may have provided a mild positive for Export Orders, our panel reported that it had hurt business activity overall.
New Orders fell to the lowest for nearly a year, continuing the downward trend seen since the start of 2014. Further negatives came from falls in firms’ Financial Position and Employment Indicators, with the latter declining to the lowest since January.
Despite the poor economic climate and the scaling back of Productive Capacity, one bright spot came as firms increased output in October with the Production Indicator increasing to the highest since June.
While economic sanctions have hit firms’ ability to raise capital in Western markets in recent months, the Availability of Credit Indicator witnessed a significant rise in October bringing it closer to the 50 breakeven line.
Commenting on the latest survey, Philip Uglow, Chief Economist of MNI Indicators said, “This was the first survey following the imposition of additional EU and US sanctions against Russian state-owned oil companies which, in combination with the recent slide in global oil prices, has had a clear negative impact on business sentiment.”
“With inflation reaching a three year high and the rouble weaker than it has ever been before, there is now every likelihood that the central bank will have to tighten policy further which will do little to help growth.”