The MNI Russia Business Indicator remained broadly stable at 46.8 in November compared with 46.7 in October as a significantly weaker rouble and Western sanctions continued to take their toll on business sentiment.
Firms continued to be hurt by the exchange rate after the rouble declined to a fresh low against the US dollar during our survey period. The Effect of the Rouble Exchange Rate Indicator, which measures the impact of the exchange rate on business, fell to the lowest in the survey’s history.
Exporters have not reported any benefit from the weaker rouble, with the Export Orders Indicator falling to the lowest since May. Overall, demand was also down with New Orders falling to a record low.
The fall in both domestic and foreign orders was accompanied by a decline in Production to the lowest level since December 2013. Inventories reached an all-time high in November, suggesting that companies were not scaling back fast enough in the face of weak demand.
The decision by the Russian central bank to sharply raise the key interest rate to 9.5% at its meeting on October 31 most likely accounted for the worsening in credit conditions. The Availability of Credit Indicator declined the most out of the 15 components included in the business survey.
Commenting on the latest survey, Philip Uglow, Chief Economist of MNI Indicators said, “Business sentiment remained depressed in November with orders declining to a record low and firms reporting that the fall in the currency was hurting business even more.”
“The rouble appears to have stabilised following the central bank’s decision to float it freely. Prices, though, have yet to fully adjust to the new rate and so it is likely that we will see inflation accelerate over the coming months. This will further weigh down on business sentiment and economic growth in general.”
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Rouble Depreciation Hurts Businesses - MNI Russia Business Indicator Broadly Stable At 46.8 In November
Date 28/11/2014