improvement in assessments of the state of the business climate is recorded in August

Enterprise monitoring data published by the Central Bank record some improvement in assessments of the state of the business climate in August (surveys were conducted September 1–12) after their deterioration in June–July. The business climate index (primarily due to current estimates of demand and expectations of output growth in the next three months) increased in August to 6.3 points from 5.3 in July. Assessments of the current situation in mining and processing have noticeably improved, which is in line with other market surveys (PMI, IEP and Rosstat). In the construction and service sectors, indices went into a noticeable decline. “There is no need to talk about a new wave of acceleration; it looks like a pause before a further downward movement,” analysts from the MMI Telegram channel comment on the dynamics of the Central Bank index.

Against the background of jumping estimates of business activity, Central Bank surveys ahead of its decision on the key rate record a noticeable increase in inflation expectations for the three months ahead, to the highest levels since the end of 2021 – beginning of 2022. The increase in price expectations is actually frontal, with the exception of mining, agriculture and automobile trade. The strongest increases were found in processing (other leading indicators also indicated this) and retail trade. The dynamics of price expectations in retail are most strongly correlated with the dynamics of consumer inflation (see chart).

According to analysts of the Telegram channel “Hard Figures”, in the next three months, annualized prices, according to the expectations of representatives of retail enterprises, will increase by an average of 14.4%. The index of price expectations in retail, as well as in the economy as a whole, reached its highest level since April 2022.

Senior Managing Director of the Analytical Department of Sberbank Natalya Zagvozdina believes that the Central Bank rate will remain double-digit in 2023, a reduction may occur in the second quarter of 2024. According to her, “it is not the level of the Central Bank rate itself that is important, but how long it will remain in double digits.” She noted that many experts believe that the regulator will begin lowering the rate in the second quarter of next year. “If we don’t start reducing the rate in the second quarter of 2024, we will end up with annualized inflation, which will be less than 4%. The economy doesn’t need this either,” said Natalya Zagvozdina.

Artem Chugunov