cooling of business activity affects the labor market

The results of market research by the Bank of Russia (the survey was conducted on January 1–18), along with surveys of representatives of SMEs (see “Kommersant” on January 22) and industry (see “Kommersant” on January 23) record a decline in business activity in the economy, primarily – through estimates of demand and output.

General current estimates of demand for products (services) of enterprises in January were slightly higher than December values, primarily due to growth in mining, production of intermediate goods, trade and agriculture. Decreased demand estimates were noted in transport and construction (largely due to rising mortgage interest rates), as well as in processing (see chart).

The expectations of enterprises in terms of demand have decreased both in the economy as a whole and by industry. The maximum reduction is in retail. In industry, demand expectations have dropped noticeably in the production of consumer goods and in the mining sector. According to the results of a survey of industrialists by the Gaidar Institute (IEP, as of January 24), demand forecasts after the local maximum of November 2023 decreased by seven points (to plus two points) – to the minimum since March 2023.

Estimates for current output in January, after rising slightly in the previous two months, fell to near the 2021 average. A worsening situation was noted in the production, processing and trade of motor vehicles. According to the Central Bank, output expectations are consistently high, especially in the production of investment goods (at a historical maximum). However, according to the IEP, in industry, due to a negative adjustment in sales forecasts, enterprises also reduced their production plans by eight points, maintaining a positive balance.

The Central Bank notes that in the first quarter, enterprises in major industries plan to increase the number of employees: expectations have become more positive. However, the IEP records that hiring plans have begun to be adjusted by the industry for the worse. However, plans to increase wages in January changed slightly – only two points down after reaching a historical maximum in December 2023 (calculated from 2014). In January, the shortage of qualified workers in industry reached another historical (since 1996) maximum of 47%.

Artem Chugunov