optimism of the Russian industry continued to decline for the second month in a row

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According to the July Gaidar Institute (IEP) market surveys, the optimism of the Russian industry continued to decline for the second month in a row. The corresponding EPI index from the peak values ​​of May in June fell only by 2 points, but over the 19 days of July – already by 6 points, to the values ​​of January-February 2023. The indicator with some lag traditionally follows the similar indicator in the Eurozone (OECD Industrial Confidence Indicator), which went into a significant minus in June, most noticeable in Germany (see chart).

The decrease in the optimism of the Russian industry in June-July is explained by the dynamics of demand: the balance of changes in sales stopped growing, and in July it fell to minus 5 points after plus 6 points in May-June. The increase in demand, according to enterprises, was replaced in July by a decrease. This led to a decrease in satisfaction with current sales and an increase in their unsatisfactory assessments: the share of sales perceived by respondents as “normal” decreased in July to 63% after 71% in June (the maximum of the current crisis).

The negative dynamics of demand required enterprises to adjust their output plans. The balance of this indicator, after a record plus 25 points in May, fell in June to plus 19 points and remained at this level in July. “The industry, therefore, is not yet sure that the positive trend in the second quarter of 2023 will change to a negative one and is carefully reviewing its production plans,” Sergey Tsukhlo, the author of the estimates, believes. In his opinion, this is supported by estimates of stocks of finished products, the balance of which remained in July in a modest plus, which indicates the full control of enterprises over the balance of supply and demand in the markets and a high readiness to respond to any new events. Plans for the output of industrial enterprises in the eurozone are also confidently losing optimism after the local surge in January and in June were close to turning into a minus.

Against the background of deteriorating estimates of demand and output, the shortage of personnel in industry only intensified – 42% of enterprises reported a shortage of workers. This is another record of personnel shortage for all 27 years of monitoring this EPI indicator. The previous high (36%, April 2023) was surpassed immediately by 6 percentage points.

Artem Chugunov

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