Industrial production of impressions – Newspaper Kommersant No. 36 (7481) dated 03/02/2023
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Noticed simultaneously by both external and internal observers, a sharp increase in business activity in the Russian Federation – for example, S&P Global estimated it in February (PMI index) at a record 53.6 points since 2017, Rosstat also records its growth in both production and processing – is still provided with “emotional” components of the indicators – expectations and hopes. As a result, after an increase in demand in January and its return to normal levels in February, the industry, without losing optimism, began to replenish warehouses with finished products after a long break. The reason for this may be the calculation of state demand in the conditions of accelerated cashing out of the budget, even at the cost of a record deficit. The RSPP, which was asked to add a tangible amount to the White House to cover it, does not look at the situation so positively: the union’s business environment index is the only one that fell in February, also due to assessments of business interaction with the state.
The Purchasing Managers’ Index (PMI), according to S&P Global, indicated a record growth in business activity in the Russian industry – in February, the indicator rose to 53.6 points after 52.6 points in January (a value above 50 points indicates an increase in business activity) . This is the most significant increase in activity in six years since the beginning of 2017. The improvement in the indicator, judging by the components of the index, is associated with an increase in production and new orders (including as part of import substitution, while export orders fell again). Companies also increased purchases of components and raw materials in anticipation of higher demand (these stocks were at their highest level since October 1997).
Rosstat’s business confidence indices show a calmer picture: after exceeding estimates for all of 2022 in January 2023, the indices rose slightly in February.
In mining, the index was 2.7% (1.2% seasonally adjusted), in processing – 3.3% (1.8%). In January, these figures were 2.7% (1.5%) and 1% (1.1%), respectively, and in terms of production, they are likely due to the successful restructuring of Russian oil export logistics and unfulfilled fears from the embargo and price ceilings on her supplies. Structurally positive estimates, as in January, were supported by expectations. Improvements in the economic situation in the next six months are expected by 20% of respondents in mining and 29% in processing. The number of optimists expecting growth in production outpaced the number of pessimists by 14 percentage points in mining and immediately by 24 percentage points in manufacturing. Estimates of the actual situation are more moderate: there were 3 p.p. more pessimists in production than optimists, while there were only 1 p.p. more optimists in processing.
At the same time, producers themselves probably understand the unreliability of building production plans on emotions: according to S&P Global, their confidence level in February was at a four-month low (in January it was at a four-year peak), prices rose as well. finished products and components (here, the price increase was the fastest since May 2022, this was facilitated, among other things, by the weakening of the ruble).
Excessive optimism of companies is also evidenced by assessments of their own capacities: according to surveys by Rosstat, 80% of company executives in mining and 85% in processing are confident that they are sufficient to cover demand for products, 6% and 11% (estimates have not changed since January) note excess capacity . The balance of estimates of the portfolio of orders also remains in the negative zone: minus 12% in production, minus 23% in processing. Compared to January, these estimates also remained virtually unchanged.
Analysts of the Gaidar Institute (IEP) give similar assessments of the state of the industry at the end of the year since the start of the Russian military operation in Ukraine. The latest market research bulletin shows that enterprises show better demand dynamics in February, a good level of sales satisfaction and stable demand forecasts.
However, the actual demand indicators, according to Rosstat surveys and IEP data, began to deteriorate in January-February, and enterprises are increasing output and stocks in warehouses in the hope of future sales.
Throughout the year, companies managed inventories more carefully and ad hoc, working to actual demand: after expanding output by September 2022, enterprises returned to minimizing inventories until early 2023. However, in January-February, the negative balance of inventories began to decline: enterprises are counting on the implementation of their quite optimistic forecasts and output plans, despite the fact that, as the author of the study, Sergey Tsukhlo, notes, they are not able to provide a statistically distinct increase in production.
Indirectly, some stabilization, but no improvement in the situation in the industry, is also evidenced by the data of the Bank of Russia published on March 1 on the results of the “counter-sanction” restructuring of large business loans: they decreased for the first time in a year – as of March 1, the figure amounted to 9.7 trillion rubles. after 9.8 trillion rubles. on February 1st. Recall that in March 2022, due to the sanctions of developed countries against the Russian Federation, it was decided to renew the “covid” right of borrowers to restructure loans, banks were recommended to carry them out as part of their own programs. The share of such “extended loans” by companies (excluding SMEs) in the total portfolio of 18 largest banks, including 13 systemically important ones, also decreased by the beginning of March to 19.6% against 20% a month earlier, although before that the figures had steadily increased from 8.4 trillion rubles, or 18.1% of the portfolio as of November 9, 2022, when the Central Bank consolidated data on such loans for the first time.
The main reason for the optimism of companies is the rapid growth of government spending: since the beginning of the year, budget spending has significantly outpaced revenues, and the government’s freedom to “transfer” funds between budget items and years, given the continued shortage of many positions in the markets after the departure of Western companies, probably gives industrialists reason to expect that these stocks will in any case be realized as the government demand funds are distributed on the market between contractors and their suppliers and subcontractors.
It should be noted that the only measurement that showed a decrease in assessments of the state of the business environment in February 2023 is the corresponding RSPP index: it fell to 45.2 points from 45.8 points in January.
A survey of representatives of large businesses confirms the increase in the number of orders, however, the pressure on the index was exerted by the increase in purchase prices and problems with logistics. In addition, the decline in the index was affected by a sharp deterioration in the B2G index (business relations with the state, 42.4 points against 45.1 points and 47.2 points in January-December). Such data can be explained by the ongoing discussion between big business and the government about an additional contribution of companies to the budget just to cover its growing deficit – the conditions and parameters for withdrawing corporate excess profits in 2022 have not been determined. At the same time, the data of the RSPP composite index turned out to be worse than the index of personal assessments of the state of the business climate by survey participants included in the study: its value, on the contrary, increased by another 1.3 points in the reporting period, which may indicate the hopes of specific managers to avoid exemptions in relation to their own companies.
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