In February – early March, business climate assessments improved

The results of market surveys by the Bank of Russia and Sergei Tsukhlo (former head of the Gaidar IEP laboratory) published yesterday indicate that after the failure in January, assessments of the business climate improved in February and early March. According to Central Bank surveys, in the first ten days of March, the indicator of the business climate in the economy grew rapidly in terms of both current estimates of output and demand, and expectations (see chart), against the background of a decrease in price expectations by 0.4 percentage points (pp. ), up to 4.8% in annual terms. However, retail price expectations in February increased for the first time since September 2022: the sector expects that in the next three months selling prices will grow by 9.3% in annual terms (plus 0.3 percentage points). Price expectations decreased the most in the agro-industrial complex (to 1.4%) and industry (to 3.9%). “Enterprises are another economic agent whose price expectations (like those of households.— “Kommersant”) above levels that would be consistent with the target inflation rates,” analysts of the Telegram channel “Hard Figures” note.

The growth in current estimates of demand and output among industries, according to the Central Bank, was virtually universal, having won back the January failure. The exception has traditionally been retail, where the largest gap with expectations is observed. Estimates of current demand in production jumped noticeably compared to January (the maximum since August 2023), in processing they turned out to be a record since February 2008, but only 2 percentage points higher than in January and the average for the second half of 2023. Data from Sergei Tsukhlo indicate that the market situation will improve already in March 2024 – according to them, the optimism of industrialists in March returned all the losses of January-February. The main source of improvements is the increase in the share of normal demand estimates to 76%, a record “for the entire period of the ‘sanctions war’.” “Enterprises are successfully adapting to the dynamics of both government procurement (budget expenditures in February were large – see Kommersant on March 11) and the efforts of former Western partners to stimulate Russian import substitution. The last two years have significantly exceeded all the ten-year efforts of Russian officials,” notes Mr. Tsukhlo, recording that sales, after a decline, returned to the level of November 2023. The impact of the budget was able to return business activity indicators to the level of the second half of 2023, when the sector was stagnating, preventing a likely decline.

Artem Chugunov