Businesses Soften Their Performance Expectations Slightly – Business Outlook Survey in July

In July, businesses slightly softened their economic expectations.
Adaptability to energy supply problems, the stable operation of the sea corridor, anchored inflation expectations, eased FX restrictions, and seasonal factors had a positive impact on businesses’ expectations.
At the same time, the deteriorating security situation, the risk of further terrorist attacks on critical infrastructure and the lengthy time for its repair, worsening exchange rate expectations, and a significant shortage of skilled workers remained constraining factors, hampering economic activity in all sectors of the economy that participate in the NBU’s monthly survey.
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 July 2024, the BAEI was 44.4, up from 43.6 in June.
A seasonal revival of activity, as well as budgetary financing for construction and the repairs of housing, infrastructure, roads and highways considerably improved construction companies’ guarded performance expectations, the sector’s index being 49.6 in July, up from 43.0 in June.
Construction companies expected an increase in their construction volumes, the number of new orders, and purchases of raw materials and supplies.
Respondents also reported firmer intentions to purchase more contractor services.
Industrial companies continued to report guarded expectations for their economic performance on the back of power cuts, more intense hostilities and shortages of qualified staff, the sector’s index being 45.8 in July, up from 45.5 in June.
Respondents softened their expectations for the amount of manufactured goods and the amount of unfinished products.
At the same time, industrial companies were more downbeat about the number of new orders for products, including export orders.
Respondents continued to expect a decrease in their stocks of raw materials and supplies and reported dimmer expectations for their finished goods stocks.
Services companies softened their negative expectations of their economic performance, despite prolonged power cuts, declining demand and higher business costs, the sector’s index being 42.5 in July, up from 39.7 in June.
Respondents were more optimistic about the amount of services provided and the number of new orders for services.
At the same time, respondents continued to expect a decrease in the amount of services that are being provided.
Trading companies slightly downgraded their economic performance expectations amid long power cuts and deteriorating exchange rate expectations, the sector’s index being 44.7 in July, down from 46.4 in June.
Respondents expected a further drop in their trade turnovers and the amount of goods purchased for sale.
For three months running, trading companies have remained downbeat about their stocks of goods for sale.
Respondents reported stronger expectations of an increase in the prices of goods purchased for sale, while declaring intentions to cut their trade margins further.
Industrial, trading and construction companies said they expected stronger growth in purchase prices, and declared firmer intentions to raise their selling prices.
Meanwhile, services companies reported slightly less firm intentions to raise their selling prices, despite expecting stronger growth in purchase prices.

The labor market situation remained challenging. Only construction companies said their staff numbers would remain unchanged on the previous month.
Industrial and services companies reported intentions to reduce their workforces, albeit at a slower pace than a month ago.
Trading companies reported the most guarded expectations.
Background This survey was carried out from 4 July through 23 July 2024.
A total of 435 companies were polled.
Of the companies polled, 43.2% are industrial companies, 30.1% services companies, 21.8% trading companies, and 4.8% construction companies; 31.7% of the respondents are large companies, 26.2% medium companies, and 42.1% small companies.
Out of the surveyed companies, 32.6% are both exporters and importers, 10.6% are exporters only, 17.5% are importers only, and 39.3% 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 monthly 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 performance 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 July 2024 survey in the Monthly Surveys of Companies Subsection of the Publications Section on the NBU’s official website.
The NBU started posting monthly survey results in the open data format.
The results of the next survey (for August 2024) will be published on the first business day of September 2024.