MNI Russia Business Sentiment Indicator: Russian Business Sentiment Climbs Above 50 - Firms' Future Expectations Boosted As Economic Recovery Continues

The latest survey showed that business sentiment rose for the third consecutive month, moving into expansionary territory for the first time since September 2015.  
 
The MNI Russia Business Sentiment Indicator increased 1.6% to 50.8 in April from 50.0 in March. Sentiment is now up 10.4% on the year and above the 12-month average of 48.4.
 
Companies were significantly less pessimistic about the next three months. Future Expectations of business conditions rose 14.2% to 46.7 in April, from 40.9 in March, the highest since October 2015. While this indicates a growing belief in a potential economic recovery, the figure was still below the series average of 52.9, and also below 50 indicating that pessimists still have the upper hand.   
 
In line with the headline indicator, key activity measures performed better in April. Production increased 4.7% on the month to sit just under the breakeven point at 49.5, while New Orders rose to the exact 50 mark. Companies were also less pessimistic regarding orders and stock levels for the next three months, with future expectations for both measures rising 2.1% and 10.9% respectively, just shy of the 50 level. These results support the view that the long-term decline in the Russian economy may have ended.
 
Inflationary pressures eased in April. Prices Received fell 6% to 50.3, leaving it at the lowest since July 2015. Despite the recent firming in commodity prices, Input Prices fell to a series low of 50.0.
 
Following last month’s hefty increase, an increasing number of companies reported that the exchange rate was hindering rather than helping business in April. The Effect of Rouble Exchange Rate indicator fell 8.4% to 44.9 from 49.0, but was above the 2016 Q1 average of 38.2. Expectations for the next three months rose 3.2% to 45.8 from 44.4 in the previous month.
 
Commenting on the latest survey, Philip Uglow, Chief Economist of MNI Indicators said, “The latest report provides further evidence that the Russian economy could be through the worst.”
 
“Notably there was a third consecutive increase in sentiment and a significant jump in expectations. Confidence, though, remains at a low level with output and orders still not expanding”.