MNI Russia Business Indicator: Russian Business Sentiment Moderates Slightly In June - Availability Of Credit Hits Record High While Orders Grow Further

Sentiment among Russian companies fell marginally in June, according to the MNI Russia Business Sentiment Survey. In spite of the small fall, more important is the fact that virtually all of the sizeable jump recorded in May was retained.
 
The MNI Russia Business Indicator dipped 0.8% to 61.3 in June from 61.8 in May, halting four months of growth in confidence. In spite of this, sentiment is up 18.3% on the year and 48.4% since the start of 2016.
 
Company executives were increasingly optimistic about forthcoming business conditions. The Future Expectations Indicator increased to 58.1 from 55.1, the fourth consecutive rise, to place it at the highest level since June 2015.
 
Firms likely ran down stock levels in a bid to satisfy rising demand in June. Inventories declined 8.7% to 41.9, while New Orders and Order Backlogs increased to 57.8 and 50.0 respectively. While the Production indicator fell 0.3% in June, to 57.3, it signals firms are still confident about current market conditions.
 
Companies’ cost of debt service decreased in June, with the Interest Rates Paid Indicator falling 1.3% to 53.3. The Future Expectations Indicator also declined in June, falling 0.4% to 51.3, and follows a rate cut by the Central Bank of Russia on June 10, which took the policy rate to 10.5%. It appears as though improved monetary conditions filtered through to companies, with our panel reporting greater access to credit. Availability of Credit rose 9.2% to a series high of 63.1 in June.
 
The exchange rate continued to hinder businesses, with the Effect of Rouble Exchange Rate Indicator slipping to 46.7 from 49.0 previously. June marks the eighth consecutive month the indicator has sat below the 50 neutral level.
 
The disinflationary trend exhibited since the start of the year appears to have reversed in recent months. Input Prices and Prices Received increased in June.

Commenting on the latest survey, Philip Uglow, Chief Economist of MNI Indicators said, “There has been a significant turnaround in sentiment since the start of the year, with June’s outturn confirming that the May jump was not a one-off."

"The evidence is now very much showing that the Russia economy has turned the corner with credit flowing through to companies and output and orders growing firmly”.