Business Activity Recovery Index was zero in March — IER survey

• Business Activity Recovery Index in March, as in February, equals zero.
• Uncertainty in the three-month perspective is highest among exporters — 20.3%.
• Inflation is accelerating: 64.4% of enterprises expect prices for raw materials and supplies to rise in the next three months, and 61.4% expect prices for finished products to increase.
• The portfolio of new orders began to grow — reaching 3.8 months in March.

The Business Activity Recovery Index (BARI) remains close to zero for the third consecutive month. This indicates a balance between those who believe the situation in their company has improved over the year and those who believe it has deteriorated.

At the same time, the BARI value worsened significantly for micro-enterprises and remains negative and at its lowest level (-0.36). The index also deteriorated for large enterprises (to 0.09), remained virtually unchanged for small businesses (0.01), and even increased for medium-sized ones (to 0.07). These findings are based on the results of the 47th monthly survey conducted by the IER among 472 industrial enterprises in March, with support from the International Renaissance Foundation.

“The overall economic outlook remains ambiguous because, on the one hand, there is an increase in medium-term uncertainty and a deterioration in long-term business expectations, while on the other hand, short-term indicators demonstrate fairly high optimism and are improving,” said Oksana Kuziakiv, Executive Director of the IER.

Production capacity utilization has not changed significantly compared to pre-war levels. The share of enterprises operating at full capacity was 4%, the same as in February, while those working at 75–99% capacity decreased by 1 percentage point to 56%. This stability suggests that certain recovery limits have been reached under current conditions.

Following a slight decline, the Industrial Confidence Indicator (ICI) has continued to grow for the third month in a row, rising from 0.11 to 0.14 in March. All three components of the index improved: production expectations, finished goods inventories, and the volume of new orders.

Uncertainty in the three-month perspective is traditionally highest among exporters — 20.3% were unable to predict their prospects for the coming quarter. The most significant reduction in uncertainty was recorded regarding new orders — from 9.1% to 6.4%.

At the same time, uncertainty in the medium term has increased. The share of businesses unable to assess the financial and economic situation of their enterprise in a six-month perspective rose from 13.4% to 19.3%, and uncertainty regarding the general economic environment in the country rose from 13.8% to 20.1%. Conversely, long-term uncertainty for the next two years stabilized at 44.7%.

“The index of expected changes in a two-year perspective has been gradually decreasing for the second month in a row. In March, compared to February, its value decreased from 0.08 to 0.05. This is the worst indicator for the entire observation period since November 2022. This dynamic was ‘driven’ by two factors: a decrease in the share of those planning to expand activities (from 10.3% to 9.4%) and a nearly twofold increase — from 2.5% to 4.3% — in the share of those who believe that in two years they will be forced to reduce activities,” noted Oksana Kuziakiv. The majority of respondents (86.3%) do not plan any changes.

Production prospects improved significantly in March. The index of production changes returned to positive territory thanks to an increase in the share of enterprises increasing production volumes to 18.1%.

The index of expected changes in production accelerated to 0.43 — the highest since last summer — amid an increase in the share of enterprises planning to increase production volumes in the next 3–4 months (from 37.3% to 43.7%). The share of those planning to cut production remains insignificant at 1.8% in March.

“A similar situation is seen in exports: expectations have been improving for the third month in a row, and the index of changes stabilized at the zero mark after a previous deterioration. Optimism is also quite high in sales and new orders,” Oksana Kuzyakiv noted.

The portfolio of new orders began to expand: after 3.4 months at the beginning of the year, the figure rose to 3.6 in February and 3.8 in March. Although the share of enterprises with long-term orders of over a year increased slightly (from 6% to 7%), the most noticeable changes occurred in the “on-the-spot” work segment — it decreased from 29% to 25%. The share of enterprises with orders for 3–5 months also increased (from 17% to 22%) and for 6–11 months (from 18% to 19%).

March saw a significant deterioration in price expectations. The price index for raw materials and supplies stood at 0.40 after 0.41 in February, while the index of expected price changes rose from 0.58 to 0.62 — its highest value since autumn 2023.

A similar trend is observed for finished products: the current index decreased slightly (from 0.44 to 0.41), while the index of expected changes continued to grow (from 0.56 to 0.60).

64.4% of enterprises expect prices for raw materials and supplies to rise in the next three months, and 61.4% expect them to rise for finished products. At the same time, the current price increase is recorded by only 42% and 42.9% of enterprises, respectively. “Based on these results, further price increases should be expected,” concludes Oksana Kuziakiv.

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.

Video presentation of the March survey results is available here.