What economic activity indicators reveal

In February's monthly statistics on Ukraine's key economic sectors published this week, all sectors, including agriculture, declined year-on-year on the basis of raw data. However, upon closer analysis, taking inflation and seasonality into account, results were far less discomforting. It is too early to signal a bottom, though.

Severely negative year-on-year raw statistical data for January-February showed that every sector declined. Jan-Feb statistical data showed the following: the agricultural production index fell 3.6%; retail sales dropped 22.6%; construction declined 32.0%; industrial production was down 21.7%; transport turnover of cargos and passengers respectively fell 23.6% and 19.4%.

Month-on-month price- and seasonal-adjusted data reveal that the contraction appears to be slowing dramatically. Adjusting for inflation and seasonality, three sectors increased month-on-month (see top chart on the right): agriculture grew 0.3%, retail sales rose 5%, and construction increased over 2.5%. Meanwhile, industrial production and turnover in cargo and passenger transportation declined, affected the by war in Donbas and the annexation of Crimea, dampening the composite index of activity to increase only 0.7% in February from January 2015.

Signalling a bottom is premature. While economic activity in December-February versus the preceding three months (Sep-Nov '14) declined 2.2% in the composite index (see bottom chart on the right) and year-on-year activity in February 2015 versus February 2014 was down by nearly 17% (see middle chart).

New industrial orders continue to decline. The available data on new industrial orders (through January 2015, see Chart 7-Chart 8 on p. 3) shows that domestic and foreign orders are tentative and trending lower. The devalued hryvnia has not yet translated into a visible increase in foreign orders.

Fixed investments are weak. According to recently published data on investments for 4Q 2014, investment activity hit a nine year record quarterly low. Businesses rely more on internal funding because of the current banking crisis. Investment activity has poor momentum in 2015 (see Chart 1-Chart 4 next page).

Источник: ICU