Gaidar Institute’s Index of Industrial Optimism Shows Decrease After Seven Months of Growth

The first June assessment of the Gaidar Institute’s Index of Industrial Optimism (IEP) showed a symbolic decline in the index after seven months of growth. Other leading indicators of the state of the industry (including Rosstat, S&P and the Bank of Russia) began to slow down in April-May 2023. The EPI hopes that June’s slight decline (two points) only signals a halt in growth, noting that the index’s readings in May and June remain the best since March 2022.

The source of the “adjustment in the mood of enterprises” is the suspension of the positive dynamics of demand, the balance of actual changes in which decreased from plus six points in May to plus four points in June. But a positive value indicates the continued growth in sales, and with an intensity better than in 2011-2020, the IEP notes. The continuation of demand growth with less intensity did not worsen its June estimates. On the contrary, the share of normal sales estimates rose to a crisis high of 75%, while the share of “below normal” estimates dropped to 21%. “Apparently, the Russian industry has corrected its ideas about the possible dynamics of sales and, accordingly, production in the context of overcoming the consequences of a protracted “sanctions war,” believes Sergey Tsukhlo, the author of the estimates.

Output forecasts lost eight points in June, but remained “in the black” – the industry is ready to further increase production volumes, but not as intensively as planned in March-May 2023. The adjustment in demand and output expectations in the second half of 2023 led to a revision in estimates of stocks of finished goods. The balance “above the norm” – “below the norm” increased by nine points and reached the “pre-Covid” level of redundancy (see chart).

“The first data on the June dynamics of output may disappoint consumers of the traditionally limited set of official statistics, which judge the state of affairs in this most important segment of the Russian economy mainly by the Rosstat index of industrial production. If its publication at the end of July confirms the results of the current survey of enterprises, then we can get a June slowdown in the sub-sanctioned output growth, which began so successfully and a little unexpectedly in March 2023,” Mr. Tsukhlo concludes.

Artem Chugunov