The export climate index rose to 93.9 in May from 92.6 in April

The Export Climate Index (ECI), calculated by the HSE ISSEK Center for Market Research, rose to 93.9 points in May after 92.6 points in April. The center’s experts record that the dynamics of the export climate of the manufacturing industry “continues a steady rise for the fifth month, demonstrating the cumulative effects of the normalization of external demand.” At the end of 2022, the index value was only 85.2 points. However, despite the improvement in the indicator, the gap with the “pre-shock” average for 2021 (105.8 points) is still large and amounts to 11.9 points.

The index reflects indicators of industrial and consumer confidence in the EU and other trading partners of the Russian Federation, as well as the real effective ruble exchange rate as a proxy indicator of price competitiveness. A value of 100 points corresponds to a neutral export climate, significantly above 100 is favorable, and significantly below 100 is depressive.

Another index – export expectations – indicates a likely significant recovery in export activity during June-August. In May, it was 100.9% (a value greater than 100% indicates an excess of the long-term average). This figure has exceeded 100% since December last year.

The rise in expectations, judging by the polls, contributed to the reduction of barriers to exports. In the first quarter of this year, the third index – export barriers – amounted to 100.5% against 101.8% in the fourth quarter of 2022 (here, growth means a worsening situation). For the first time after last year’s growth, the negative impact of export barriers on the dynamics of external demand decreased and became as restrained as possible, the ISSEK notes. The reduction of barriers was the result of the adaptation of enterprises and the reduction of the negative impact of such factors as “insufficient external demand for manufactured products” and “high uncertainty”.

We note that in June, optimism in the Russian industry somewhat weakened – the value of the Purchasing Managers’ Index (PMI) from S&P Global fell to 52.6 points against 53.5 points in May (a value above 50 points indicates an expansion of business activity). Nevertheless, companies noted an increase in the number of new orders, including export orders, and reported that they had a record increase in purchases of raw materials and components.

Tatyana Edovina