By KYIV. Dec 4 (Interfax-Ukraine) – The Business Activity Expectations Index (BAEI), which the National Bank of Ukraine (NBU) calculates on a scale from zero to 100, again dropped by 0.5 points in November to 49.1 points, remaining below its neutral level of 50 points, for the second month in a row, the central bank said last week.
“Hostilities and their repercussions, rising security risks, disrupted supply chains, somewhat limited electricity supply, higher electricity prices for businesses, tax changes, narrowing investment demand, and shortages of skilled workers, are continuing to dampen companies’ economic activity, while also negatively affecting their expectations,” the regulator said, listing the negative factors.
According to the survey, Construction companies were the most pessimistic among other sectors about their economic performance, because of rising production costs, narrowing investment demand, shortages of skilled workers and seasonal conditions: the sector’s DI was 40.6, down from 44.8 in October.
Moreover, respondents expected a further drop in construction volumes, the number of new orders, and in purchases of raw materials and supplies. Despite softening their views about the cost of contractor services, construction companies reported intentions to purchase less of these services. Respondents also remained downbeat about the availability of contractors.
With significantly weaker expectations of slower growth in supplier prices, respondents declared intentions to cut their selling prices slightly.
Following builders, the largest decline in the sectoral index was recorded among traders, the sector’s index was 50.9 in November, down from 53.0 in October. Despite this, trading companies remained the only sector that expected an improvement in their performance amid slower inflation, sustained domestic demand, and the increased supply of goods.
As the regulator said, traders continued to declare intentions to further increase, albeit at a slower pace, their goods turnover and the amount of goods purchased for sale. At the same time, companies expected a decrease in their stocks of goods for sale. Companies expected weaker growth in purchase prices and in the cost of goods purchased for sale, while also declaring intentions to cut their trade margins further.
Meanwhile, industrial companies expected a deterioration in their economic performance due to difficulties with exporting goods, disrupted supply chains, and more fierce hostilities: the sector’s index was 49.2 in November, down from 50.0 in October. Respondents continued to expect, albeit at a slower pace, an increase in the amount of manufactured goods and the number of new orders for products.
At the same time, as noted in the report, Respondents upgraded their views, to a positive level, about their finished goods stocks. Conversely, respondents somewhat strengthened their pessimistic views about the number of new export orders and the amount of unfinished products.
Services companies slightly softened their negative views of their economic performance in the short-term, the sector’s DI being 48.4 in November, up from 47.2 in October. Respondents expected a rise in the amount of services provided, softened their expectations about a drop in the number of new orders, while also expecting no change in the amount of services that are being provided.
Companies declared intentions to raise their selling prices on the back of ongoing rises in purchase prices.
Staff expectations remained guarded. Managers across all sectors continued to expect reductions in their workforces, with construction companies reporting the firmest expectations.
The NBU said that this survey was carried out from 6 November through 23 November 2023. A total of 460 companies were polled. Of the companies polled, 44.6% are industrial companies, 27.2% services companies, 23.7% trading companies, and 4.6% construction companies; 33.3% of the respondents are large companies, 28.9% medium companies, and 37.8% small companies.
Out of the surveyed companies, 31.1% are both exporters and importers, 9.6% are exporters only, 17.4% are importers only, and 41.3% are neither exporters nor importers.
