Business expectations worsen in Nov – NBU

The Business Activity Expectations Index (BAEI), calculated by the National Bank of Ukraine (NBU) on a scale from zero to 100, after increasing by 0.7 points in October, fell by 2.3 points in November – to 47.2 points, falling below the February 2024 value (47.5 points), the regulator’s website reports.

"The increased intensity of hostilities, renewed power outages due to Russian attacks on the energy system, further growth in energy, labor and logistics costs, accelerating inflation, a significant shortage of skilled workers, and seasonal factors restrained economic activity and weakened business expectations," the NBU reported.

Trading companies were the only ones to report a positive economic outlook thanks to sustained domestic demand and a sufficient supply of goods. The sector’s index was 51.4 in November, down from 51.9 in October.

"Respondents expected an increase in trade turnover and the amount of goods purchased for sale, while also reporting positive expectations about their stocks of goods for sale. Respondents continued to declare intentions to cut their trade margins," the NBU reported.

Industrial companies downgraded their economic outlook for November amid a worsening security situation, power shortages and rising production costs, the sector’s index being 46.7 in November, down from 49.8 in October.

"In contrast to the previous month, respondents expected a decrease in the amount of manufactured goods and in the number of new orders for products. Companies also weakened their expectations about the number of new export orders and the amount of unfinished products," the NBU reported.

Conversely, respondents expected a slight improvement in their finished goods stocks, while also expecting an increase in their stocks of raw materials and supplies.

Services companies also downgraded their performance expectations on the back of rising logistics costs, power cuts, and shortages of qualified staff, the sector’s index being 44.8 in November, down from 47.2 in October.

"Companies reported dimmer expectations for the amount of services provided and the number of new orders for services. Expectations about the amount of services that are being provided remained weak," the NBU reported.

Construction companies reported the most pessimistic economic outlook due to a seasonal decline in construction of roads and infrastructure and shortages of qualified staff, the sector’s index being 43.6 in November, down from 49.6 in October.

"Respondents expected a drop in construction volumes, the number of new orders, and in purchases of raw materials and supplies. At the same time, respondents remained upbeat, despite downgrading their expectations significantly, about purchases of contractor services, amid stronger negative expectations about contractors’ availability, and slower growth in the cost of contractor services," the NBU reported.

With weaker growth in purchase prices, industrial, construction and services companies declared intention to raise their selling prices more slowly. Only trading companies intended to raise their selling prices slightly.

"The labor market situation remained challenging. Respondents across all of the surveyed sectors declared intentions to reduce their workforces, with the strongest intentions reported by services companies," the NBU reported.