Business Climate Worsens In December, Expectations Remain Optimistic, NSI Report States

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Business Climate Worsens In December, Expectations Remain Optimistic, NSI Report States

In December 2007 the economic conjuncture in the country remained favourable in spite of the 1.1 percentage points decline of the total business climate indicator against the previous month. However, it is still 24.6 percentage points above its long-term average, the National Statistical Institute (NSI) reports.

Industry. In December 2007 the composite business climate indicator in the sector of industry remained unchanged. At the same time managers’ expectations of the upcoming 6 months are more optimistic.The uncertain economic environment continues to be the number one worrying factor, NSI's last survey shows. Other negative factors are weak economic legislation and insufficient domestic demand. Around one fifth of managers in the sector expect selling prices to rise over the next 3 months.

Construction. In December 2007 the economic conjuncture in the sector of construction remaines favourable. However, the composite indicator of business climate in the sector fell 4.1 percentage points against the previous month. This was due to the shifting of construction entrepreneurs' opinions about business situation from more optimistic to moderate. Construction activity pace stays unchanged from last month, and the prognoses for the next 3 months are of maintaining the present levels.

The main reasons limiting the activity of enterprises continue to be the competition in the sector and labor shortage. The influence of the factor “materials costs” increased and more managers expect selling prices to rise.

Retail trade. The composite indicator of business climate in retail trade dropped 0.8 percentage points below its November level, which was due to moderate prognosis about the business situation over the next 6 months, however, statistics shows that sales in the past 3 months have risen. 42.1% of managers don't expects any changes in sales in the following three months, while 53.3% forecast an increase. Most managers expect selling prices to rise.

Service sector. In December 2007 the composite indicator of business climate in the service sector fell 1.3 percentage points, due to the modest assessment of the present business situation in teh sphere.
Managers are more optimistic about the future development in the sector, forecasting greater demand and more job openings in the next three months.
61.4% of enterprises citre competition as the greatest factor limiting their activity, followed by weak economic legislation, labor shortage etc.
Over one fifth of managers (67%) expect prices to decrease in the near future.

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