Business Activity Recovery Index fell to a three-year low – IER survey

• The Business Activity Recovery Index in April dropped below zero (-0.11), indicating a deterioration in business situation assessments.
• At the same time, industry maintains resilience: 60% of businesses demonstrate a capacity utilization level of over 75%.
• The average portfolio of new orders stands at 2.9 months.
• Business price expectations improved in April, especially in the perspective of the next 3 months.

The Business Activity Recovery Index (BARI) balanced near zero for three months, but in April it fell to minus 0.11. This is the lowest BARI value since March 2023.

Business Activity Recovery Index (BARI) has significantly deteriorated

The BARI value significantly worsened for large, medium, and small enterprises. Only the BARI indicator for micro-enterprises improved, but it continues to remain negative and the worst among all business groups (-0.29). These findings are based on the results of the 48th monthly survey conducted by the IER in April among 471 industrial enterprises.

Production capacity utilization compared to pre-war levels did not change in April: the total share of enterprises operating at full or nearly full (75% to 99%) capacity remained at 60%.

The Aggregate Index of Industrial Prospects (AIIP) interrupted its trend of gradual growth and, albeit slightly, decreased from 0.14 to 0.11.

“The business sector continues to demonstrate operational resilience even in the conditions of a long war and high uncertainty. At the same time, medium-term business expectations have weakened somewhat due to the slow pace of economic recovery, labor shortages, and increasing pressure on costs, primarily from the labor market and energy prices. Despite this, companies maintain the ability to adapt to new conditions and support production processes,” said Oksana Kuziakiv, Executive Director of the IER.

Uncertainty in the three-month perspective remained without significant changes for most production indicators, except for exports, where it fell by more than a third — from 20.3% to 12.7%. Only one in eight exporters was unable to predict their quarterly prospects.

Uncertainty in the 6-month perspective has been growing for the second consecutive month, both for the general economic environment in the country (from 20.1% to 28%) and for the financial and economic situation at the enterprise (from 19.3% to 25.3%).

Uncertainty is growing in the six-month perspective and remains without significant changes for most production indicators

Uncertainty in the 2-year perspective decreased after two months of stability — April’s 41.2% is the lowest figure since February.

“In the two-year perspective, business demonstrates predominantly stable expectations regarding the scale of its activity. The vast majority of companies — 85.4% — do not plan significant changes, which indicates a cautious adaptation to current economic conditions. At the same time, a slight increase to 11.1% in the share of enterprises planning expansion may signal a gradual recovery of business activity and improved sentiment in certain sectors in the long term,” noted Oksana Kuziakiv.

Production results have been growing for the second month in a row, while short-term expectations worsened in April, interrupting the growth trend. The index of production changes significantly increased from 0.02 to 0.18 due to an increase in the share of enterprises expanding production volumes — from 18.1% to 26.6%.

The index of expected changes in production fell from 0.43 to 0.34 due to a narrowing share of enterprises planning to increase production volumes in the next 3–4 months (from 43.7% to 37.1%). The share of those planning a reduction in production stands at 3.6%.

“April data indicate a moderate recovery in business export activity after a weak March. The share of enterprises reporting export growth significantly increased — from 16.3% to 26.9%, while the share of those recording a decrease fell from 20% to 13%. As a result, the balance of assessments has significantly improved for the first time in several months — the index of changes rose from zero to 0.17,” noted Oksana Kuziakiv.

The portfolio of new orders fell sharply to another minimum — 2.9 months after 3.8 in March. The structure of the order portfolio demonstrates a shift toward short-term planning.

The portfolio of new orders continues to fall

“The share of enterprises working effectively ‘on the spot’ increased to 29%, as did the share of companies with orders for only 1–2 months ahead — up to 33%. Meanwhile, the share of enterprises with an order portfolio for 6–11 months was almost halved to 10%, which may indicate caution among counterparties regarding medium-term commitments,” said Oksana Kuziakiv.

Business price expectations improved in April, especially in the perspective of the coming months. The share of enterprises expecting prices for raw materials and supplies to rise in three months decreased from 64.4% to 51.6%.

A similar calming of inflationary forecasts occurred regarding finished products — the share of enterprises expecting price increases decreased from 61.4% to 49.3%.

Up to 500 Ukrainian industrial enterprises located in 21 of 27 regions of Ukraine participate in the New Monthly Enterprises Survey (#NRES) by the IER. The survey has been conducted on a monthly basis since May 2022.

The video presentation of the April survey results is available here.