Page 26 - bne IntelliNews Country Report: Russia Dec17

Russia Business Outlook survey published on November 13.
The quarterly survey of the private sector firms showed strong expectations of new business growth and job creation in over four years, reflecting the prospects of larger client bases and new product development.
"Optimism towards output growth is the highest since June 2013, while expectations for new orders are the strongest since early-2014," Markit economist Sian Jones commented.
The net balance of firms expecting a rise in business activity has increased from +25% in June to +29% in October, with the upturn expected to be broad-based as both manufacturers and service providers signalled a rise in positive sentiment.
"Forecasts for output growth in the next year have been influenced by the modernisation of production processes, diversification, and greater market development," the survey claims.
Panellists note, however, that the threats to future expansion include lower customer demand and increased competition.
Amid strengthened optimism surrounding future business activity, firms expect capital expenditure to rise solidly in the next year, with firms ready to modernise their machinery and
diversify their product bases.
Notably, the firms also showed the first significant staff hiring expectations since the recent recession. Both goods producers and service providers foresee workforce numbers increasing steeply in the next year, with Russian manufacturing firms being upbeat when compared with the global average.
In line with inflation recently diving to all-time-low, private sector firms expect softer inflationary pressures over the next year than those seen in June's survey. "That said, cost burdens and charges are forecast to rise steeply in the manufacturing sector," Markit warns.
At the same time, despite the positive output and new business expectations, firms’ forecasts for growth in business revenues have weakened since June. "Although still positive, sentiment towards future revenues is at its lowest level since October 2016," according to the survey.
"Similarly, firms express a lower degree of confidence towards profitability," Markit notes, while still adding that Russia's "forecasts for profitability remain above the BRIC average and in line with the global average."
According to the latest RosStat's Business Confidence Index, in August the index was broadly stable. In seasonally adjusted terms, the manufacturing and extraction confidence indicators remained flat at -2% and -1%, respectively, in the reporting month.
After a boost to the confidence indicators seen in the beginning of the year, the confidence trend remained positive and stable. Similarly, the latest manufacturing PMI and industrial output reports showed continuing but bumpy positive momentum maintained after a strong start of 2016.
26 RUSSIA Country Report December 2017 www.intellinews.com