The latest regular quarterly survey of company managers regarding their assessment of current and future business activity, inflation and exchange rate expectations, and changes in the business climate in the country was conducted in November 2011.
Conclusions
According to the survey results, respondents expect economic growth in Ukraine in the next 12 months. Expectations about the volume of production of goods and services deteriorated. Balance of answers (calculated as the difference between the percentage of positive and negative responses) decreased by 10.3 p.p. to 0.6%.
Inflation expectations have intensified. The weighted average expected inflation rate increased to 14% vs. 13.6% in Q3 of 2011. But respondent’s inflation expectations were higher than actually inflation over the all period of observations from 2006. An increase in production costs and energy costs were named as the key factors for the expected high inflation. Respondents have somewhat intensified devaluation expectations to US dollar and euro.
Estimation of the current business activity slightly deteriorated. According to the survey results, the respondents deteriorated estimations of their own current financial and economic conditions. The balance of opinions has worsened (-0.4% vs. 4.3% in Q3). The respondents reported increase in inventories second quarter in a row. Capacity utilization has declined.
Business expectations index increased to 119.3% vs. 119.1% in Q3. Expectations improved about investments in machinery and about employment growth over the next 12 months. Expectations about financial and economic conditions, future sales, investments in buildings over the next 12 months became slightly worse. Most of respondents have deteriorated business activity expectations over the next 3 months due to seasonal factor.
Most of respondents expect input and output prices growth. But share of respondents who does not expect change in prices increased in comparison with the previous quarter. The cost of raw materials and energy are expected to remain the key factors to the changes in output price levels. Influence of the exchange rate volatility and credit interest rates on prices is still on a low level. Production costs will grow slowly and labor costs will grow essentially.
The respondents noted a reduction in loans availability and expect reduction in borrowing needs over the next 3 months. The high level of interest rates remains the key restraining factor in borrowing from banks. Influence of the exchange rate volatility factor is low.
In total, 1,241 enterprises from all regions were interviewed. They were selected to reflect the economy structure with regards to principal types of activity, forms of ownership and size of enterprises as measured by the number of employees.
Disclaimer: The results of the survey reflect the opinions of respondents – Ukrainian business managers – as of November 2011, and do not represent the views and policies of the NBU.