Тhe economic conjuncture in the country remained favorable in August 2008 despite the fact that total business climate indicator decreased by 1.1 percentage points compared to the previous month. The decline may be put down to the more moderate opinions of managers in the industry and construction.

The composite business climate indicator in industry fell by 4.1 percentage points in August compared to July, as a result of the shift in managers’ expectations about the business situation in enterprises for the next 6 months from “better” toward the “same” business situation. As regards to the present and the expected production activity the opinions were also more moderate as compared to the ones expressed last month. The number of enterprises indicating “an increase in the activity” decreased at the expense of the ones that maintained the same production.

NSI's conjuncture inquiries in August showed that assessments about the present level of orders from abroad were more favorable. Nevertheless, the production assurance with domestic orders deteriorated. The insufficient domestic demand, the shortage of labor force and the uncertain economic environment were the factors pointed out by enterprises most frequently as limiting activity.

As regards to selling prices, the share of industrial managers who do not foresee any change increased from 71.9% in July to 77.1% in August. At the same time there was an increase of 4.5 percentage points in the share of those, whose expectations were about price declines over the next 3 months. The balance of selling price expectations dropped by 14.1 percentage points in August, as a result of those favorable changes.

Тhe economic conjuncture in construction remained favorable in August even though the composite indicator of business climate dropped 2.5 percentage points below its July level. Just as in the industry the drop may be attributed to the shift towards more moderate expectations about the business situation in the enterprises over the next 6 months, namely from “better” towards maintaining the “same” business situation.

The construction activity, however, received better estimates compared to the previous month. The expectations over the next 3 months were that it would increase (46.3% of enterprises) or remain the same (49.4%), which was accompanied with increased expectations for additional hiring of labor force. The labor shortage, together with the competition in the branch, the financial problems and material costs were with the greatest weights among factors limiting the activity in the branch.

As regards the indebtedness the last inquiry in construction registered an increase of the number of clients with delay in payments. The share of construction entrepreneurs, who foresaw an increase of selling prices over the next 3 months, remained high at 43.0% in August.

The composite indicator “business climate in retail trade” rose by 2.9 percentage points compared to July. The last inquiry registered an increased optimism by retailers about both present and expected business situation of enterprises. At the same time the expectations about the level of orders placed with suppliers and the volume of sales over the next 3 months were also more favorable.

The activity of retailers was limited mainly by the uncertain economic environment and the competition in the sector, according to the opinions respectively of 40.8 and 40.4% of respondents and 34.0% of them pointed the insufficient demand as a limiting factor.

The balance indicator of selling prices expectations over the next 3 months fell by 1.8 percentage points in August but still managed to remain high (44.8%).

The composite business climate indicator in service sector increased by 2.7 percentage points in August 2008 compared to July, which may be put down to better assessments of the present business situation in enterprises. The expectations about activity development over the next 6 months were also favorable.

The demand in the services sector at present has improved, according to managers and their expectations for the next 3 months showed that it would retain the same level (52.1% of the enterprises) or increase (42.9%).

The most serious problem limiting the activity of enterprises remained the competition in the sector pointed out by 57.1% of the entrepreneurs. As regards to the selling prices the bulk of the managers (69.0%) foresaw no change over the next 3 months, 20.5% expected a price cut 10.5% - an increase.