Confidence Still Below 50 as New Orders Fall to a Record Low
Russian business sentiment improved in March from a record low in the previous month, although a further decline in orders suggests that the recovery may be short-lived.
The MNI Russia Business Sentiment Indicator rose by 16.2% to 48.8 in March from 42.0 in February. In spite of the rise, almost 85% of our panel thought that overall business conditions had not changed since February, with only 7% of respondents reporting that they had improved.
New Orders declined to a record low and Export Orders fell back into contraction in spite of the weakness in the rouble. While Production bounced back in March, it remained below the 50 breakeven level with the trend still downwards.
A record number of companies reported that their inventories were growing due to weak demand with the Inventories Indicator trending sharply upwards since sanctions were imposed in early 2014.
Following a sharp spike in February, both Input Prices and Prices Received dropped back in March. Even so, both remained at elevated levels which continued to weigh down on overall sentiment.
The recent weakening in the exchange rate was taken negatively by our panel, with a greater proportion of companies reporting that the rouble was hurting rather than helping their business.
Commenting on the latest survey, Philip Uglow, Chief Economist of MNI Indicators said, “There were some conflicting signals from this month’s survey. Overall business sentiment bounced back, as did output, although both remained in contraction and at low levels. New Orders, however, continued to fall sharply and firms reported a record pace of stock building which was likely unplanned for the most part.”
“Moreover, sentiment in the first quarter of 2015 as a whole was the lowest in the survey’s history, an early indication that the economy may already be in recession.”