MNI Russia Business Report 2014-04

MNI Russia Business Report
April 2014
Insight and data for better decisions

MNI Russia Business Report - April 20142
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Written and researched by
Philip Uglow, Chief Economist
Shaily Mittal, Economist
MNI Indicators | Deutsche Börse Group
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Release Time
Embargoed until 9:45 a.m. Moscow time
April 28, 2014

MNI Russia Business Report - April 2014 3
Contents
4 Editorial
6 Executive Summary
10 Economic Landscape
14 Indicators
15 MNI Russia Business Indicator
16 Production
17 New Orders
18 Export Orders
19 Productive Capacity
20 Order Backlogs
21 Employment
22 Inventories
23 Input Prices
24 Prices Received
25 Financial Position
26 Interest Rates Paid
27 Effect of Rouble Exchange Rate
28 Supplier Delivery Times
29 Availability of Credit
30 Data Tables
34 Methodology

Spitzzeile Titel4
President Putin couldn’t have picked a worse time
for a war with the west. With the economy already
flat on its back there is a now a good chance the
Russian economy will fall into recession.
Going it alone

President Putin couldn’t have picked a worse time for
a war with the west. With the economy already flat on
its back there is a now a good chance the Russian
economy will fall into recession.
Some have seen the recent crisis as an opportunity for
Russia to make a dramatic change to its economic
model, including Russia’s Prime Minister, Dmitry
Medvedev. Russia’s reliance on revenues from natural
resources has helped boost consumption at the
expense of investment.
With the threat of harsher sanctions Russia could, so
the theory goes, invest more domestically to help
insulate itself from the rest of the world. I have some
sympathy with this view, in the sense that over the
medium term, it will increase the political will to
change the growth model.
But while a change to the growth model is badly
needed, a more isolationist policy is not the way to go.
And it’s not easy for Russia to go it alone either.
Russia is part of the global economy and sanctions
could seriously hurt them if the west decided to flex
their muscles more. Russia had $732 billion in foreign
debt according to the World Bank at the start of 2014
with most of that owed by corporates or banks. A
ratcheting up of sanctions would have severe
consequences for the economy. Already capital is
flowing out of the country at an astonishing rate.
Our own business survey this month showed the
overall MNI Business Indicator rising slightly in April,
albeit down from the level seen in February. But some
of the underlying data tells a more worrying story.
Export Orders hit the lowest since the series began in
March 2013, a clear sign that the Ukraine crisis is
having an impact.
Russian officials in recent weeks have struck a
slightly more conciliatory tone and said that the
recent Geneva agreement would be implemented.
Possibly there is a growing realisation that while
Russia’s military might is easily mobilised, its
economy is not what it once was.
Philip Uglow
Chief Economist
MNI Indicators

Spitzzeile Titel6
Russian business sentiment improved in April after
declining sharply in March to the lowest level in
three months, amid growing concerns about the
economic impact of Russia’s military intervention
in Crimea.
Executive Summary

declining sharply in March to the lowest level in three
months, amid growing concerns about the economic
impact of Russia’s military intervention in Crimea.
The MNI Russia Business Indicator rose to 55.6 in
April from 52.5 in March, although was well below
the 62.9 outturn seen in April 2013. The rise in the
indicator suggests that Russian businesses have not
yet felt any major impact from limited sanctions which
have been imposed by the US and the EU.
There was a slight increase in the proportion of
companies who thought business conditions would
improve in the next three months. The Expectations
Indicator rose marginally to 54.3 in April from 53.3 in
the previous month.
Current conditions for Production improved after
declining significantly in March to the lowest level
since December. The Production Indicator rose to
57.3 in April from 52.5 in the previous month, but
was below the 58.2 outturn seen at the start of the
year.
There have been some limited signs of a pick-up in
the economy with industrial production growing for
the second consecutive month in March, by 1.4% on
the year following growth of 2.1% in February.
The New Orders Indicator increased in April, although
the rise was unable to offset the sharp fall in the
previous month that left New Orders at the lowest
level since December.
Under the growing threat of more widespread
sanctions, expectations of companies for New Orders
in three months‘ time remained low and were 16.5%
below the same period a year ago. The Expectations
Indicator remained broadly stable in April at 52.2
compared with 51.8 in the previous month.
Over the past year, companies’ hiring has reduced
considerably with the Employment Indicator down by
9.3%.
The Inventories Indicator declined significantly by
20.3% in April to 32.2 from 40.4 in the previous
month. The continued slowdown in inventories of
finished items is probably due to the uncertainty
regarding further sanctions on Russian businesses
and it seems that companies are meeting demand
requirements more by running down their stocks.
The Prices Received Indicator, which measures prices
that companies charge for their goods and services,
declined to 50.5 in April from 53.1 in March. After
remaining in contraction for three months, the Future
Expectations indicator moved above the breakeven
level in the previous month and it remained flat at
53.1 in April. This was the first time since August
2013 that the prices charged by panellists were lower
than their future expectations possibly indicating
some future inflationary pressure still.
The Effect of Rouble Exchange Rate Indicator, which
measures whether the exchange rate is helping or
hurting businesses, declined for the second month in
a row to 50.9 from 53.7 in March, significantly below
the record high level of 61.0 recorded in February.
The time taken to deliver supplies to companies
contracted in April. The Indicator for Supplier Delivery
Times fell below the breakeven level to 49.5 from
50.0 in the previous month. This was the first time
the indicator has slipped below the 50 level this year,
possibly reflecting the reduced order book especially
for exports, leading to a shorter time taken by suppliers
to deliver.
40
45
50
55
60
65
70
75
Mar-13 Jun-13 Sep-13 Dec-13 Mar-14
MNI Russia Business Indicator
Current Conditions
Future Expectations

Overview
Feb-14 Mar-14 Apr-14
Highest
Since
Lowest
Since
3-Month
Average
Monthly
Change
Monthly %
Change
MNI Russia Business
Indicator
Current Conditions 60.0 52.5 55.6 Feb-14 - 56.0 3.1 5.9%
Future Expectations 55.3 53.3 54.3 Feb-14 - 54.3 1.0 1.9%
Production
New Orders
Future Expectations 51.0 51.8 52.2 Sep-13 - 51.7 0.4 0.8%
Export Orders
Current Conditions 57.2 48.3 44.4 - series low 50.0 -3.9 -8.1%
Productive Capacity
Future Expectations 49.7 49.7 49.7 Mar-14 - 49.7 0.0 0.0%
Order Backlogs
Future Expectations 43.3 43.0 42.5 - Dec-13 42.9 -0.5 -1.2%
Employment
Current Conditions 50.0 50.0 50.8 Oct-13 - 50.3 0.8 1.6%
Future Expectations 49.5 50.5 50.0 - Feb-14 50.0 -0.5 -1.0%
Inventories
Input Prices
Current Conditions 51.3 52.1 51.8 - Feb-14 51.7 -0.3 -0.6%
Future Expectations 50.0 52.1 50.3 - Feb-14 50.8 -1.8 -3.5%
Prices Received
Current Conditions 53.8 53.1 50.5 - Apr-13 52.5 -2.6 -4.9%
Financial Position
Current Conditions 63.8 60.1 59.8 - Dec-13 61.2 -0.3 -0.5%
Future Expectations 58.4 55.6 54.4 - series low 56.1 -1.2 -2.2%
Interest Rates Paid
Effect of Rouble Exchange
Rate
Current Conditions 61.0 53.7 50.9 - Aug-13 55.2 -2.8 -5.2%
Supplier Delivery Times
Current Conditions 50.5 50.0 49.5 - Aug-13 50.0 -0.5 -1.0%
Availability of Credit
Current Conditions 51.9 53.0 53.9 Jan-14 - 52.9 0.9 1.7%
Future Expectations 50.9 50.0 51.5 Nov-13 - 50.8 1.5 3.0%

The turmoil in
Ukraine has thrown
Russia into
economic turmoil.
Russia’s economic growth contracted in the first
quarter and amid sanctions from the US and EU,
growth for the full year has been revised down to
just 0.5%.

Spitzzeile Titel10
Russian ministers had predicted GDP growth of
2.5% this year before the Ukrainian turmoil.
However, this has been dramatically reduced to
just 0.5%, following a paltry 1.3% growth in 2013.
Economic Landscape

The turmoil in Ukraine has thrown Russia into
economic turmoil. Russia’s economic growth
contracted in the first quarter and amid sanctions
from the US and EU, growth for the full year has been
revised down to just 0.5%. The central bank of Russia
does not intend to loosen its monetary policy any time
soon as it struggles to contain inflation and stabilise
the rouble.
On a more positive note, manufacturing output posted
the highest growth in four months and the decline in
car sales eased. The rouble has gained slightly from
the previous month, but is still down by 10% against
the US Dollar since the start of the year. With the
tensions in Ukraine showing few signs of abating,
there are clear risks that the crisis could escalate
further which could result in further pain for Russia’s
economy.
Low economic growth
Following meagre growth in 2013, growth has
remained extremely weak at the beginning of 2014.
Economic Development Minister Alexei Ulyukayev
recently announced that GDP fell 0.5% in the first
quarter of 2014 as compared with the last quarter of
2013, and was up just 0.8% compared with the same
period a year ago. He attributed low growth to the
contraction in capital investment which fell by 4.8%
in the first quarter compared with a year earlier.
Consumption remained relatively firm, but it reflected
a one-off public sector pay increase and so is unlikely
to be sustained.
Russian ministers had predicted GDP growth of 2.5%
this year before the Ukrainian turmoil. However, this
has been dramatically reduced to just 0.5%, following
a paltry 1.3% growth in 2013.
Earlier in the month, Central Bank governor Elvira
Nabiullina also revised the growth rates for 2014 to
below 1% from 1.5-1.8% previously.
Industrial production expansion slows in March
Industrial production grew by 1.4% on the year in
March, down from 2.1% in February due to a fall in
utilities output of 6.6%. Manufacturing output,
though, accelerated a little to 3.5% in March from
3.4% in February.
Mining and quarrying output rose by 0.6% compared
with growth of 0.8% in February.
The economy ministry expects industrial output to
increase by 1.3% this year after it showed no growth
in 2013.
Economic Growth
-15%
-10%
-5%
0%
5%
10%
15%
2007 2008 2009 2010 2011 2012 2013
GDP Growth y/y %
Source: Federal State Statistics Service of Russia

Car sales broadly stable
In March, 243,335 cars were sold, little changed
from the same month a year earlier, according to the
Association of European Businesses (AEB). Signs are
that the car industry may have bottomed out as the
pace of the decline has eased in recent months. The
three months to March saw a decline of 2.3% in car
sales compared with the same period a year earlier.
Russia is the second largest market for cars in Europe
and last year saw the first annual fall in sales in 2013
in four years.
The AEB remains cautious about the outlook and has
forecasted that the car sales will decline by 1.6% in
2014 following a drop of 5.5% in the previous year.
The government offered cheap credit on cars to propel
the car industry in the second half of 2013, barring
which car sales would have been even worse. The
Ministry of Economy recently announced plans not to
renew subsidies for car loans which could impact
negatively.
A major blow to the Russian Automotive Industry was
experienced earlier this month with Ford announcing
a stoppage to certain operations in the country and
the loss of 700 jobs at its St Petersburg plant.
Higher inflation in March
Consumer price inflation rose sharply to 6.9% in
March from 6.2% in February. Food prices rose by
8.4% on the year, compared with 6.9% in the
previous month. Core inflation accelerated to 6%
from 5.6% in the previous month.
The recent fall in the rouble has made the central
bank’s job far more difficult. Russia imports a large
amount of consumer goods and the depreciation of
the currency will push up prices over the coming
months.
Inflation
CPI Growth y/y %
The central bank is targeting an inflation rate of
5% this year, with a margin of 1.5%. The central
bank Governor has said that it will not lower
borrowing costs until at least June as inflationary
risks remain high and expects any stabilisation in
inflation only in the second half of 2014. She
added that risk of inflation exceeding the target
level of 5% remains high.
High key policy rate
The central bank raised its key rate – the one-week
repo rate at which it lends money to financial
institutions – to 7% from 5.5% at a surprise
meeting on March 3 aimed at limiting inflationary
Car Sales
-100%
-50%
0%
50%
100%
150%
2007
2008
2009
2010
2011
2012
2013
2014
Car and Light Commercial Vehicles y/y%
0%
2%
4%
6%
8%
10%
12%
14%
16%
2008
2009
2010
2011
2012
2013

risks that stemmed from the rouble weakening to an
all-time low.
The central bank left all interest rates unchanged at
its scheduled meeting on March 14 and said it will
maintain a tight monetary policy stance well into the
foreseeable future. While the cental bank framed the
surprise tighening in policy as a move to offset the
inflationary impact of the weaker rouble, a key aim
was to try and avert a damaging run on the currency.
The bank has made it clear that its top priority is to
limit the inflationary consequences of the exchange
rate and to support financial stability. Low inflation
would make borrowing more affordable and lead to a
road of longer-term investment, which in turn would
support economic growth. Despite the economic
slowdown, central bank governor Elvira Nabiullina
said the bank did not plan to cut its key lending rate
from 7% until its June meeting at the earliest.
Depreciation in the rouble
So far this year, the rouble has been one of the worst
financial instability. This compares with an outflow of
$59.7 billion during the whole of 2013. Recently, the
Russian Economic Development Ministry increased
its estimate of capital flight to $100 billion from a
previous estimate of $25 billion in 2014.
Trade surplus narrows in February
Russia‘s trade surplus narrowed to $12.4 billion in
February, from $18.9 billion a month earlier and from
$15.3 billion in the same month last year, as imports
fell by the most since 2009 due to the sharp
depreciation of the rouble.
Exports declined for the first time in four months, to
$36.5 billion in February, 12.7% below the same
period a year ago. Imports stood at $24.2 billion,
down by 9.4% on the year.
performing emerging market currencies. It is down by
10% against the US Dollar since the start of the year,
due to Russia’s actions in Ukraine and fears of an
escalation in the situation. However, the rouble has
appreciated by 1.4% over the past month.
Even before tensions intensified in Ukraine, the rouble
had been weakening as the Central Bank’s move to a
fully free floating currency meant reduced currency
intervention. The Central Bank was forced to pause its
shift towards inflation targeting in early March to halt
the rouble’s decline after Russia annexed Crimea.
Russia has a healthy $486 billion in international
currency reserves, but that is down from $493 billion
in March and $522 billion in October 2013 as the
country has tried to protect the rouble from capital
flight.
Capital outflow from Russia’s private sector stood at
$63.7 billion in the first quarter of 2014 owing to the

Spitzzeile Titel14
the 62.9 outturn seen in April 2013.
Indicators

declining sharply in March to the lowest level in three
months, amid growing concerns about the economic
impact of Russia’s military intervention in Crimea.
the 62.9 outturn seen in April 2013. The rise in the
indicator suggests that Russian businesses have not
yet felt any major impact from limited sanctions which
have been imposed by the US and the EU.
While the Business Indicator increased, 10 out of the
15 current conditions indicators declined between
March and April, and five hit a series low.
Business confidence remained broadly stable among
service sector companies while it improved among
manufacturing and construction companies.
There was a slight increase in the proportion of
companies who thought business conditions would
improve in the next three months. The Expectations
Indicator rose marginally to 54.3 in April from 53.3 in
the previous month. Expectations among
manufacturing companies increased the most while it
fell among service companies. Construction
companies remained the most optimistic about overall
business conditions in the coming months.
In April, four out of the 15 future expectations
indicators fell while five remained unchanged from
March.
55.6
Recovers Slightly
Apr-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14
Current Conditions 62.9 51.5 45.5 57.9 60.0 52.5 55.6
Future Expectations 64.1 45.0 49.5 53.0 55.3 53.3 54.3
40
45
50
55
60
65
70
75
Current Conditions
Future Expectations

Current conditions for Production improved after
declining significantly in March to the lowest level
since December. The Production Indicator rose to
57.3 in April from 52.5 in the previous month, but
was below the 58.2 outturn seen at the start of the
year.
There have been some limited signs of a pick-up in
the economy with industrial production growing for
the second consecutive month in March, by 1.4% on
the year following growth of 2.1% in February.
There was a significant increase in the proportion of
construction companies who reported higher
Production levels. The Production Indicator also
increased for manufacturing and service companies,
but by a smaller degree.
Companies’ optimism for the next three months picked
up slightly with the Future Expectations Indicator
increasing to 52.0 from 50.8 in the previous month,
although it was well below the same period a year
earlier.
Expectations about Production levels in the next three
months remained broadly stable for manufacturing
and construction sector companies while they
improved significantly for service sector companies as
the indicator climbed above the 50 breakeven level.
Production
Rises in April
57.3
40
45
50
55
60
65
Production
Current Conditions
Future Expectations
Production

The New Orders Indicator increased in April, although
the rise was unable to offset the sharp fall in the
previous month that left New Orders at the lowest
level since December.
The New Orders Indicator recovered slightly to 58.8
from 57.5 in March, although it remained well below
the outturn of 62.1 seen in April a year ago. The rise
in New Orders was mainly led by construction and
manufacturing sector companies while more services
companies reported lower orders in April.
Under the growing threat of more widespread
sanctions, expectations of companies for New Orders
in three months‘ time remained low and were 16.5%
below the same period a year ago. The Expectations
Indicator remained broadly stable in April at 52.2
compared with 51.8 in the previous month.
Construction companies’ expectations were broadly
stable compared with the previous month while
manufacturers reported a decline. Service sector
companies were the least optimistic about future New
Orders but were the only sector to report an
improvement from the previous month.
New Orders
Small Increase
58.8
40
45
50
55
60
65
70
75
80
New Orders
Current Conditions
Future Expectations
New Orders

The Export Orders Indicator declined markedly in
March and it fell further in April to a record low in the
wake of Russia’s military action in Crimea and
increased tensions in Ukraine.
The Export Orders Indicator fell by 8.1% on the month
to 44.4 from 48.3 in March. Tensions in the region
have led to a clear reduction in overseas orders with
the indicator down by 26.6% from the same period a
year ago.
All three sectors reported a sharp decline in Export
Orders with the indicator below the 50 mark in each
of them.
Future Expectations for Export Orders remained in
contraction for the eighth consecutive month as there
are few signs of a resolution to the situation in Ukraine.
The Expectations Indicator remained broadly stable at
43.5 in April compared with 43.0 in March.
Export Orders
Hit a Record Low
44.4
35
40
45
50
55
60
65
70
Export Orders
Current Conditions
Future Expectations
Export Orders
-60%
-40%
-20%
0%
20%
40%
60%
80%
0
10
20
30
40
50
60
2007 2008 2009 2010 2011 2012 2013
Trend in Exports
Exports FOB (billion USD)
Exports y/y % (RHS)
Source: The Central Bank of the Russian Federation

The Productive Capacity Indicator was broadly stable
at 50.0 in April compared with 50.3 in the previous
month.
Productive Capacity has been stable since June 2013,
hovering very close to 51, although capacity is
considerably down from the outturn of 57.7 seen in
April 2013.
The Expectations Indicator remained flat at 49.7 for
the fifth consecutive month in April. The indicator has
trended downwards since the series started in March
2013, and has been in contraction since August last
year.
Productive Capacity
Remains Stable
50.0
40
45
50
55
60
65
Productive Capacity
Current Conditions
Future Expectations
Productive Capacity
45
50
55
60
65
70
75
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
Productive Capacity and Rate of Capacity Utilisation
MNI Productive Capacity
Rate of Capacity Utilisation*
*Source: Federal State Statistics Service of Russia

Order Backlogs declined to a record low in April,
having fallen into contraction in March.
The Order Backlogs Indicator decreased by 16.7% to
39.5 from 47.4 in March and was well below the
outturn seen in the same month a year ago.
The decline was led by manufacturing and service
companies, where the Order Backlogs Indicator fell to
the lowest in nine months. Backlogs were unchanged
for construction companies and remained in
contraction. The slowdown in the economy has
resulted in a greater degree of excess capacity that
means companies are better placed to meet any new
demand swiftly.
Future Expectations for backlogs remained firmly in
contraction and declined slightly to 42.5 from 43.0 in
March. Except for May last year, when the Future
Expectations Indicator was exactly 50, expectations
for Order Backlogs have always been in contraction,
although have trended up gradually since October.
Order Backlogs
Sink to record low
39.5
30
35
40
45
50
55
Order Backlogs
Current Conditions
Future Expectations
Order Backlogs

The majority of the companies continued to report
that the number of employees they had was just right,
although the Employment Indicator increased slightly
to 50.8 after remaining broadly stable at 50 in March.
Companies are asked whether the number of
employees they have is not enough, just right or too
many, compared with the previous month.
Over the past year, companies’ hiring has reduced
considerably with the Employment Indicator down by
9.3%.
The Employment Indicator for construction companies
in April increased above the breakeven 50 level for
the first time in six months while it rose slightly for
manufacturing firms. For service sector companies,
employment conditions remained flat, just above the
50 mark.
The car maker Ford announced job cuts and halted
certain operations at two of its plants following the
slowdown in the Russian auto market over the past
year. The company has been further hit by the
declining value of the rouble and recent turmoil due
the Ukraine situation.
Companies in our panel were slightly less optimistic
about employment in the next three months as the
Expectations Indicator fell to 50.0 from 50.5 in
March, the lowest since February.
Employment
Highest Since October 2013
50.8
40
42
44
46
48
50
52
54
56
58
Employment
Current Conditions
Future Expectations
Employment

The Inventories Indicator declined significantly by
20.3% in April to 32.2 from 40.4 in the previous
month.
The continued slowdown in inventories of finished
items is probably due to the uncertainty regarding
further sanctions on Russian businesses and it seems
that companies are meeting demand requirements
more by running down their stocks.
The decline in inventories was led by manufacturing
and construction companies, and the latter
experienced a much sharper fall.
Companies expected to raise their inventories slightly
in three months’ time with the Future Expectations
Indicator increasing to 41.2 in April from 40.2 in the
previous month. Companies began destocking in
September last year and their expectations for the
future turned negative in November and have
remained in contraction since then.
Inventories
Hits a Series Low
32.2
30
35
40
45
50
55
Inventories
Current Conditions
Future Expectations
Inventories

The Input Prices Indicator remained broadly stable in
April at 51.8 compared with 52.1 in March, and still
below the series average of 54.6.
The three month trend in Input Prices has declined
significantly since the summer of 2013 and has been
flat in recent months.
The small decline in Input Prices was led by
manufacturing and service sector companies. There
was large jump in the proportion of construction
companies who reported an increase in Input Prices
after remaining broadly stable at the 50 mark for the
previous five months.
Companies expected input prices in the next three
months to fall, as the indicator declined to 50.3 from
52.1 in the previous month. The indicator for all three
sectors was around the breakeven level, although
there was a sharp reduction in the proportion of
construction companies who expected future input
prices to rise.
Input Prices
Broadly Stable
51.8
40
45
50
55
60
65
70
75
80
Input Prices
Current Conditions
Future Expectations
Input Prices

The Prices Received Indicator, which measures prices
that companies charge for their goods and services,
declined to 50.5 in April from 53.1 in March.
There was a drop in the proportion of manufacturing
and service companies who charged higher prices as
compared with the previous month. The Prices
Received Indicator for construction companies
remained stable at the breakeven level for the sixth
month in a row.
After remaining in contraction for three months, the
Future Expectations indicator moved above the
breakeven level in the previous month and it remained
flat at 53.1 in April as the majority of the companies
expected the prices they charge to remain the same.
This was the first time since August 2013 that the
prices charged by panellists were lower than their
future expectations possibly indicating some future
inflationary pressure still.
Official data showed that consumer price inflation
rose sharply to 6.9% in March from 6.2% in February.
The central bank is targeting an inflation rate of 5%
this year, within a margin of 1.5%. However, the
recent fall in the rouble is likely to push up inflation
making the job of hitting the target more difficult.
Prices Received
Lowest Since April 2013
50.5
40
45
50
55
60
65
70
75
Prices Received
Current Conditions
Future Expectations
Prices Received

The indicator measuring the Financial Position of
companies declined in April to the lowest since
December 2013, led mainly by a deterioration among
service sector companies.
The Financial Position Indicator declined slightly to
59.8 from 60.1 in March. In spite of the economy’s
slowdown, the financial position of Russian companies
has remained fairly healthy with the indicator
averaging 60.8 from March 2013 when the survey
started, until April 2014.
Investors are nervous about the escalating tensions
between the west and Russia following the annexation
of Crimea, which has driven down the Russian stock
market by more than 10% since the start of the year.
Companies’ Expectations about their Financial
Position in three months’ time fell to a record low in
April. The Future Expectations Indicator declined to
54.4 from 55.6 in the previous month, mainly led by
manufacturing and service companies. Construction
companies were the most optimistic and their indicator
remained broadly stable compared with the previous
month.
Financial Position
Future Expectations Hit a
Record Low
59.8
40
45
50
55
60
65
70
75
80
Financial Position
Current Conditions
Future Expectations
Financial Position

The indicator for Interest Rates Paid declined slightly
in April to a series low of 49.7 following a sharp fall in
the previous month to 50.0.
The decline in the indicator comes in spite of the
increase in the central bank’s key rate. The one-week
repo rate at which it lends money to financial
institutions was increased to 7% from 5.5% at a
surprise meeting on March 3 in an effort to stabilise
its currency and left it at the same level at their regular
meeting on March 14 as expected. The key message
of the meeting was that the recent policy tightening
will not be reversed in the coming months as inflation
and financial stability risks remained high. The move
was clearly aimed at trying to stem the decline of the
currency.
The yield on the Russian 10-year government bond
increased significantly to 8.93% on April 16, up from
8.33% on March 21, while the three month interbank
rate stood at 8.42% compared with 8.39% in March.
The indicators for manufacturing and construction
sector companies were bang in line at the expansion/
contraction line, while for services companies it
contracted, although the majority said they paid same
interest rates as in the previous month.
Companies expected interest rates paid to contract for
the first time in the previous month and this
expectation remained the same in April as the Future
Expectations Indicator remained at 49.4.
Interest Rates Paid
Broadly Stable
49.7
45
47
49
51
53
55
57
59
Interest Rates Paid
Current Conditions
Future Expectations
Interest Rates Paid

The Effect of Rouble Exchange Rate Indicator, which
measures whether the exchange rate is helping or
hurting businesses, declined for the second month in
a row to 50.9 from 53.7 in March, significantly below
the record high level of 61.0 recorded in February.
A value above 50 shows more firms reported that the
exchange rate was helping, while a reading below 50
shows the exchange rate was hurting.
The Indicator hit a record low in August when there
was a sell-off in all emerging markets after the Fed
announced tapering of its bond buying programme.
The indicator subsequently rose sharply but has fallen
since February when the rouble depreciated sharply
following Russia’s annexation of Crimea.
The rouble has fallen by around 10% against the US
dollar since the start of the year and the speed of the
descent has raised fears of economic instability
among companies. There has been a small recovery
in the currency over the past month.
There was a decline in the proportion of manufacturing
and services companies who reported the exchange
rate was helping business. Construction companies
reported that they were not affected by the volatility of
the rouble exchange rate.
Expectations for three months‘ time remained at 50.0
for the sixth consecutive month, having stood slightly
above the breakeven level in September and October
2013.
Effect of Rouble Exchange Rate
Fewer Companies say Exchange
Rate is Helping
50.9
45
47
49
51
53
55
57
59
61
63
Current Conditions
Future Expectations
20
25
30
35
40
2007 2008 2009 2010 2011 2012 2013 2014
Depreciation in the Rouble
RUB against USD
Source: The Central Bank of the Russian Federation

The time taken to deliver supplies to companies
contracted in April. The Indicator for Supplier Delivery
Times fell below the breakeven level to 49.5 from
50.0 in the previous month.
This was the first time the indicator has slipped below
the 50 level this year, possibly reflecting the reduced
order book especially for exports, leading to a shorter
time taken by suppliers to deliver. The indicator fell
and remained below the 50 among manufacturing
companies while for construction companies it
remained flat at 50.
Expectations for three months’ time remained
unchanged in April at 49.7 for the fourth consecutive
month. Future expectations have remained broadly
stable since March last year, when the survey started,
with the series averaging 49.7, and only rising above
the breakeven level of 50 twice since then.
Below 50
49.5
40
42
44
46
48
50
52
54
Current Conditions
Future Expectations

Following three months of tightening, companies
reported some easing in their credit availability in
March and this optimism continued in April as the
Availability of Credit Indicator increased by 1.7% to
53.9 from 53.0 in the previous month, the highest
level since January.
Credit availability had risen gradually in 2013 until
November and has subsequently trended downwards.
However, it is still 11.4% above the level seen in April
a year earlier.
The improvement in credit availability was led by
manufacturing companies while it remained broadly
stable for construction companies, bang in line at the
50 expansion/contraction level. In contrast, the
indicator for service companies declined after rising in
March.
Businesses expected credit availability in three
months’ time to improve slightly after falling to a series
low close to the 50 level in March. The Expectations
Indicator increased for the first time in seven months,
by 3% to 51.5 in April. The indicator has averaged
52.4 since March 2013, when the survey started.
International Credit rating agencies have warned that
Russia‘s debt rating could be cut to junk status
following the recent western sanctions. While so far
sanctions have been limited to travel restrictions and
asset freezes on individuals and a handful of banks,
wider financial sanctions could cut off Russia’s credit
lines, raising concerns that firms may not be able to
refinance debt without the state’s support.
Expands in April
53.9
40
45
50
55
60
65
70
Current Conditions
Future Expectations
Russia‘s central bank sought to assure that the
blacklisting of Rossiya bank by US authorities in
March does not have a serious bearing on the lender‘s
financial stability and that the government would take
necessary steps to support the lender and the interests
of its depositors and creditors.

Spitzzeile Titel30
31 Historical Summary
32 Historical Records
33 Historical Records - Quarterly
Data Tables

Historical Summary
2013 2014
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
Current Conditions 62.9 62.5 57.8 51.8 51.3 59.0 56.3 51.5 45.5 57.9 60.0 52.5 55.6
Future Expectations 64.1 59.5 57.5 59.0 61.5 55.0 47.2 45.0 49.5 53.0 55.3 53.3 54.3
Production
New Orders
Export Orders
Productive Capacity
Order Backlogs
Employment
Inventories
Input Prices
Prices Received
Financial Position
Interest Rates Paid
Supplier Delivery Time

Historical Records
2013- Current
Minimum Maximum Mean Median
Current Conditions 45.5 62.9 56.0 57.1
Future Expectations 45.0 71.3 56.1 55.2
Production
New Orders
Export Orders
Productive Capacity
Order Backlogs
Employment
Inventories
Input Prices
Prices Received
Financial Position
Interest Rates Paid

Historical Records - Quarterly
Q3 13 Q4 13 Q1 14 Quarterly Change
Quarterly %
Change
Current Conditions 54.0 51.1 56.8 5.7 11.2%
Future Expectations 58.5 47.2 53.9 6.7 14.2%
Production
New Orders
Export Orders
Productive Capacity
Current Conditions 51.1 51.0 50.3 -0.7 -1.4%
Order Backlogs
Employment
Inventories
Future Expectations 48.9 46.5 42.6 -3.9 -8.4%
Input Prices
Prices Received
Financial Position
Interest Rates Paid

Methodology
MNI Russia Business Sentiment is a monthly poll of
Russian business executives at companies listed on
the Moscow Exchange. Companies are a mix of
manufacturing, service, construction and agricultural
firms.
Respondents are asked their opinion on whether a
particular business activity has increased, decreased
or remained the same compared with the previous
month as well as their expectations for three months
ahead, e.g. Is Production Higher/Same/Lower
compared with a month ago?
A diffusion indicator is then calculated by adding the
percentage share of positive responses to half the
percentage of those respondents reporting no change.
An indicator reading above 50 shows expansion,
below 50 indicates contraction and a result of 50
means no change.
Data is collected through computer aided telephone
interviews and around 200 companies are surveyed
each month.

Discovering trends in Emerging
Markets
MNI‘s Emerging Markets Indicators explore attitudes, perspectives and confidence
in Russia, India and China. Our data and monthly reports present an advance
picture of the economic landscape as perceived by businesses and consumers.
Our indicators allow investors, economists, analysts, and companies to identify
economic trends and make informed investment and business decisions. Our data
moves markets.

Published by
MNI Indicators | Deutsche Börse Group
Westferry House
11 Westferry Circus
London
E14 4HE
Copyright© 2014 MNI Indicators | Deutsche Börse
Group.
Reproduction or retransmission in whole or in part is
prohibited except by permission. All rights reserved.

MNI Russia Business Report 2014-04

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