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Russian business confidence increases but remains subdued

Staff Writer | July 17, 2018
The latest IHS Markit Russia Business Outlook survey signals a sustained subdued level of optimism towards the outlook for business activity over the coming year.
Russia   The net balance of companies (+24%) expecting a rise in new orders
Although expectations are the strongest since October 2017, the net balance of firms forecasting a rise in business activity (+24%) remains below the historical series trend (+32%) and the global average (+31%).

That said, where surveyed companies expect a rise in output, they attribute this to new product development and investment in new technology.

Although firms generally expect an increase in client demand, forecasts for new business are the lowest since October 2016.

The net balance of companies (+24%) expecting a rise in new orders is well below the trend level (+33%) since late-2009.

Respondents cite access to new markets and increases in marketing as reasons for optimism.

However, others raise concerns about fragile market conditions across Russia.

A greater net balance of Russian private sector firms expect a rise in costs compared to the previous survey.

The forecast for input price inflation is the strongest recorded since October 2013.

Despite weaker predictions towards new business, charges are also forecast to rise at a quicker pace than was previously estimated.

Moreover, the net balance is the strongest in a year.

In line with the trend for output, June survey data indicates weaker employment growth expectations among Russian private sector firms.

Furthermore, the net balance (+14%) is the lowest in a year and below both the long-run series average (+16%) and the global trend (+17%).

Companies are also less confident towards capital expenditure plans, with the net balance dipping to the lowest since October 2016.

Optimism towards employment growth is now lower across both the manufacturing and service sector, with each reporting the weakest confidence for 12 months.

Moreover, forecasts have now softened in the manufacturing sector for two successive survey periods.

Following a period of relatively subdued cost expectations, a larger proportion of firms are predicting a rise in input prices over the coming 12 months.

The net balance remains below the series trend (+43%), but is the highest since October 2013.

Forecasts are also well above the global average (+27%).