20:06 01.04.2024

Business positively assesses his expectations for first time in five months in March

4 min read
Business positively assesses his expectations for first time in five months in March

The Business activity expectations index (BAEI), calculated by the National Bank of Ukraine (NBU) on a scale from zero to 100, has been increasing for the second month in a row and in March immediately rose by 4.5 points to 52 points, five months later again exceeding the neutral level, the NBU said on Monday.

"The improved sentiment of respondents across all sectors resulted, among other things, from an increase in maritime and railway transportation, a persistently stable FX market, low inflation expectations, and a seasonal revival in business activity," the regulator said.

However, more intense missile attacks on critical infrastructure, the risk that international funding will not be sufficient, and the blockade of Ukraine's western border remained constraining factors.

Traditionally, trade enterprises remain the most optimistic among sectors. For the second month in a row, they positively assessed the results of their operations due to the increase in maritime and railway transportation, slowing inflation and stable consumer demand. Thus, the sectoral index rose to 55.1 points in March from 50.1 in February.

According to the survey, trading enterprises predicted a further increase in the volume of trade turnover and purchases of goods for sale, and also strengthened their positive assessments of an increase in product balances for sale. Respondents were inclined to see an increase in the cost of goods purchased for sale and maintained their estimates for a decrease in trading margins.

Construction companies sharply improved their assessments of the economic prospects for their activities: the sectoral index rose to 53.5 points compared to 43.7 in February. According to the National Bank, this figure is ensured by budget funding for infrastructure restoration and favourable weather conditions.

"At the same time, Respondents expected an increase in construction volumes, the number of new orders and in purchases of raw materials and supplies. Despite retaining negative views about the cost of contractor services and the availability of contractors, respondents expected to purchase more contractor services," the central bank informs about the expectations of respondents in the construction sector.

The sectoral index of industrial enterprises in March increased by 2.7 points to 51 points.

"Industrial companies reported positive performance expectations for the near future on the back of steady consumer demand, a sustainable FX market, and low inflation expectations," the regulator said.

According to it, industrialists were optimistic about the volume of products produced and new orders for them, including export ones. It is noted that estimates for the reduction in volumes of work in progress have come close to the neutral level, and for the balances of finished products - for the first time in three months they have improved to a positive level. At the same time, the surveyed enterprises softened negative assessments regarding stocks of raw materials and materials.

As for service sector enterprises, for the first time since October 2021 they were optimistic about their economic prospects due to the establishment of logistics chains and the revival of demand.

The sectoral index of the service sector in March immediately increased by 4.13 points, to 50.6.

As the survey shows, in contrast to previous months, respondents expected an increase in the volume of new orders, services provided, and services in progress.

It is indicated that enterprises in all sectors expected a further increase in the prices of their own products and services against the backdrop of an increase in the growth rate of purchase prices. Moreover, estimates regarding employment improved slightly, but nevertheless remained heterogeneous.

"Staff expectations have improved somewhat, but still varied across sectors. Construction and trading companies said they intended to expand their workforces slightly, while industrial and services companies continued to report intentions to cut their workforces," the NBU said in a statement.

The NBU said the monthly survey of enterprises was conducted from March 4 to March 21. Some 456 enterprises took part in it. Among the respondents, some 45% are industrial companies, some 27.9% are service companies, some 22.4% are trade companies, some 4.8% are construction companies; some 30.5% of respondents are large enterprises, some 27.2% are medium-sized, some 42.3% are small. At the same time, 32.5% of the surveyed enterprises carry out export and import operations, 10.1% only export operations, some 18.0% only import operations, some 39.5% do not carry out external economic operations.