Russian Business Confidence Remains Steady in June 2017
Business confidence in Russia
Business confidence in Russia (ERUS) in June 2017 continued to be stable month-over-month, and it was higher than it was last year during this time. The improved global growth (ACWI) and the resurgence of oil prices (XOM) (BP) (CVX) have helped to improve business confidence in Russia. However, the headwinds of the economic sanctions continue to keep confidence in the negative territory in 2017. Let’s look at the business confidence in Russia in the below chart.
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Business confidence in Russia in June 2017
Business confidence in Russia remained unchanged at -1 in June 2017 as compared to the previous two months. The businesses showed improved expectations for the future with 24% of manufacturers surveyed in June 2017 expecting production to rise in the next three months as compared 26% in May 2017. The demand expectations continued to be in negative territory, although they improved slightly in June 2017 at -33.0% as compared to -34.0% in May 2017.
Current economic situation
Overall, the economic situation is considered favorable by 10% of respondents in a business confidence survey in June 2017, the same as in May 2017. About 74.0% of respondents consider the current economic situation satisfactory, which is the same as compared to the previous month. The Russian economy continues to face economic uncertainty due to sanctions in the US (SPY) and Europe (VGK) in 2017.
Future economic situation
About 30% of respondents in June 2017 expect improvement in the economic situation in the next six months as compared to 26% in the last month. The lack of demand and high taxes seem to be impacting the business expectations in June 2017.
Impact of improved business confidence
Russia’s business confidence shows optimism about the state of the economy. The business community’s expectations are expected to drive investments and spending activities. Improved business confidence is also expected to boost manufacturing activity in Russia.
However, oil prices have been struggling to maintain an uptrend in the last few months, which might affect oil-dependent economies (EWZ). The iShares MSCI Russia Capped (ERUS), which offers exposure to Russian equities, has fallen by about 9% so far in 2017, as of July 20, 2017.