20:41 05.03.2024

Business improves business activity estimates in Feb

4 min read
Business improves business activity estimates in Feb

The Business Activity Expectations Index (BAEI), calculated by the National Bank of Ukraine (NBU) on a scale from zero to 100, in February, after four months of decline, rose by 6.5 points to 47.5 points, the NBU reported last week.

"High security risks, delayed external financing, logistical problems due to the blockade of Ukraine’s western border, sluggish investment demand, significant shortages of skilled workers, and a seasonal weakening of economic activity at the beginning of the year continued to restrain economic activity and negatively affect businesses' expectations," the regulator said.

According to the survey, trading enterprises were the only ones among those surveyed who positively assessed their business activity due to the reduction in inflationary pressure, maintaining the stability of the foreign exchange market and consumer demand: the sectoral index increased by 11.2 points to 50.1 in February.

In contrast to the two previous months, trading companies expected a rise in their trade turnovers and in the amount of goods purchased for sale. Trading companies also improved their views about their stocks of goods for sale.

"Respondents expected a considerable increase in the cost of goods purchased for sale amid rising logistics prices because of the blockade of Ukraine's western border. At the same time, trading companies reported weaker intentions to cut their trade margins," the National Bank said, commenting on the survey results.

Although remaining pessimistic, industrial companies softened their negative views about their economic performance amid high security risks and logistical hurdles resulting from the blockade of Ukraine's western border, the sector's index was 48.3 in February, up from 43.7 in January.

According to the National Bank, respondents expected an increase in the amount of manufactured goods. Respondents were less downbeat about the number of new orders for products, including export orders, and about finished goods stocks.

Respondents continued to expect a drop in their unfinished products and in stocks of raw materials and supplies.

At the same time, with less firm expectations of an increase in raw material and supplies prices, respondents declared weaker intentions to raise their selling prices.

Although softening their negative expectations, services companies continued to report a negative economic outlook due to greater security risks, higher logistics costs and sluggish demand, the sector's index was 45.3, up from 40.4 in January.

According to the survey, Respondents expected a slower decline in the number of new orders, the amount of services provided and the amount of services that are being provided. Services companies also expected slower growth in both purchase and selling prices.

Respondents from the construction sector have for five months in a row reported the most pessimistic expectations for their economic performance among other economic sectors. The reasons for this were the seasonal decline in economic activity, weak investment demand, and considerable shortages of skilled workers. The sector's index was 43.7, up from 31.9 in January.

In February, builders significantly weakened negative assessments regarding construction volumes, new orders, purchases of raw materials and materials, as well as the availability of contractors. At the same time, respondents did not predict changes in the volume of purchases of the latter’s services, despite expectations of a significant acceleration in the growth rate of the cost of their services.

Companies significantly softened their negative expectations for construction volumes, the number of new orders, and purchases of raw materials and supplies.

As evidenced by the survey data, Staff expectations remained guarded. Trading companies expected a slight increase in their staff numbers, while respondents from the rest of the sectors expected their workforces to reduce at a slower pace. The most difficult situation was in construction.

The NBU said that the monthly survey was carried out from 5 February through 22 February 2024. A total of 448 companies were polled. Of the companies polled, 45.3% are industrial companies, 28.3% services companies, 21.7% trading companies, and 4.7% construction companies; 33.5% of the respondents are large companies, 28.1% medium companies, and 38.4% small companies.

Out of the surveyed companies, 33.3% are both exporters and importers, 10.3% are exporters only, 16.1% are importers only, and 40.4% are neither exporters nor importers.