Businesses Continued to Upgrade Their Performance Expectations – Business Outlook Survey in August

In August, businesses continued to upgrade their performance expectations.

The gradual adaptation to constant power outages, the obtaining of backup power supplies, budget funding for infrastructure recovery and road construction, sustained domestic demand, the sufficient supply of goods, the stable operation of the sea corridor, and seasonal factors continued to have a positive impact on the expectations of surveyed companies. At the same time, the deteriorating security situation, more intense missile attacks on energy facilities, the long time required for repairing these facilities, worsening exchange rate expectations, higher business costs for labor and energy, and a shortage of qualified personnel remained restraining factors. This is evidenced by the business activity expectations index (BAEI), which the NBU calculates on a monthly basis, apart from the forced break in March–May 2022. In August 2024, the index was 48.4, up from 44.4 in July.

Construction companies reported a positive economic outlook on the back of favorable weather conditions, stronger domestic demand, and budgetary financing to restore infrastructure and roads, the sector’s index being 50.7 in August, up from 49.6 in July. Construction companies expected a further increase in their construction volumes, the number of new orders, and purchases of raw materials and supplies. At the same time, respondents were less confident about an increase in their purchases of contractor services.

Trading companies upgraded their economic performance expectations amid sustained domestic demand, moderate inflation, and the sufficient supply of goods, the sector’s index being 50.4 in August, up from 44.7 in July. In contrast to the three previous months, respondents expected an uptick in their trade turnover and the amount of goods purchased for sale, while also improving their expectations for their stocks of goods for sale.

Industrial companies improved their performance expectations, through they were still guarded on the back of power cuts, shortages of qualified staff, and higher production costs, the sector’s index being 48.6 in August, up from 45.8 in July. In contrast to the two previous months, respondents expected an increase in the amount of manufactured goods and the number of new orders for products. Respondents significantly improved their expectations for the number of new export orders for products, stocks of raw materials and supplies, and finished goods stocks. At the same time, industrial companies were more downbeat about their amount of unfinished products.

Although they are improving, the performance expectations of services companies remained the most guarded across the sectors, due to prolonged power cuts, shortages of qualified staff and higher business costs, the sector’s index being 46.5 in August, up from 42.5 in July. Respondents were more optimistic about the amount of services provided, the amount of services that are being provided and the number of new orders for services.

Despite strong expectations of a rise in purchase prices, companies across all surveyed sectors declared intentions to raise their selling prices more slowly.

Labor market conditions remained unstable. Only construction companies reported intentions to expand their workforces. Conversely, respondents in other sectors reported intentions to reduce their workforces, albeit at a slower pace than a month ago. Trading companies had the most pessimistic employment outlook.