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December BOS shows that businesses downgrade their performance expectations on the back of persisting quarantine restrictions

December BOS shows that businesses downgrade their performance expectations on the back of persisting quarantine restrictions

In December, businesses downgraded their views about their economic outlook again. This is evidenced by the business activity expectations index (BAEI), which the NBU calculates on a monthly basis. In December 2021, the index was 48.6, down from 49.8 in November. For the first time since January 2021, all sectoral indices moved below their neutral levels. Surging energy prices, shortages of raw materials, higher production costs, a greater probability of an escalation of the armed conflict and an increase in COVID-19 cases worldwide weakened expectations in all of the surveyed sectors.

Industrial companies were pessimistic about their performance and economic outlook for the first time in the last seven months, as the sector’s DI dropped to 49.0, down from 50.7 in November. Respondents expected a decrease in the number of new export orders and the amount of unfinished products. At the same time, industrial companies remained upbeat about the amount of manufactured goods and the number of new orders for products.

The expectations of trading companies also worsened, moving below their neutral level, as the sector’s DI dropped to 49.6 in December, down from 50.0 in November. Respondents expected an increase in the stocks of goods for sale, while also expecting the amount of goods purchased for sale to be unchanged on the previous month. Trading companies said they intended to decrease their trade margins further. With a seasonal rise in demand, respondents remained upbeat about their trade turnover.

Services companies have been expecting weaker performance for two months running, the DI being 47.8 in December, down from 48.8 in November. Respondents expected a decrease in the number of new orders, while also expecting no change in the amount of services provided. At the same time, they expected an increase in the amount of services that are being provided.

Construction companies reported the most pessimistic expectations of their performance, as the sector’s index dropped to 47.2 in December, down from 50.4 in November, dragged down by a seasonal decline in economic activity and narrowing investment demand. Respondents expected a drop in the number of new orders and, consequently, a drop in their purchases of raw materials and supplies. At the same time, respondents remained optimistic about their construction volumes and purchases of contractor services.

Companies across all sectors reported intentions to raise their selling prices further on the back of higher raw material and supplies prices.

Employment expectations worsened: only trading companies said they intended to hire more staff, while industrial, construction and services companies reported intentions to cut their workforces.

Background information

This survey was carried out from 6 December through 23 December 2021. A total of 405 companies were polled. Of the companies polled, 44.7% are industrial companies, 28.6% services companies, 20.7% trading companies, and 5.9% construction companies; 33.3% of the respondents are large companies, 28.9% medium companies, and 37.8% small companies.

Of the companies surveyed, 36.8% are both exporters and importers, 10.1% are exporters only, 14.6% are importers only, and 38.5% are neither exporters nor importers.

The findings presented reflect only the opinions of the respondents (top managers of Ukrainian companies), and should not be considered as NBU forecasts or assessments.

The business activity expectations index (BAEI) is a tool for conducting latest assessments and detecting trends in economic development. It is calculated on the basis of surveys of Ukrainian real sector companies.

Monthly business activity expectations indices are calculated on the basis of respondents’ replies. These indices are as follows: sectoral indices (for each sector of the economy) and a composite index (describes the country’s economic development over a month). A value of 50 corresponds to the neutral level. Index values above the neutral level indicate positive expectations.

Read more about the November 2021 survey in the Monthly Surveys of Companies Subsection of the Publications Section on the NBU’s official website.

The NBU has started posting monthly survey results in the open data format.

The results of the next survey (for January) will be published on the first business day of February 2022.

 

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