Business confidence drops again as demand remains weak
Both sales and market growth decline at sharper rates
Companies continued to cut prices in effort to boost sales
The October reading for the World Economics Headline Sales Managers’ Index (SMI) for Mongolia stood at 36.1, down from 38.6 in September. This indicated a sharper deterioration in business conditions that was the lowest level since March. The index has now been in negative territory for the past twenty months. The SMI provides the most up-to-date monthly assessment of economic activity in the country. It is derived from an average of the Business Confidence, Market Growth, Product Sales, Prices Charged and Staffing Indexes. An index above 50 indicates growth, while an index below 50 indicates contraction. Furthermore, the latest decline in the headline index reflected all five of its components.
Business confidence remained negative in October linked to weaker domestic demand, high interest rates, uncertainty over commodity prices, and falling direct investment. The Business Confidence Index posted 34.8, down from 40.3 in September, the weakest level since March. According to panellists, business conditions over the coming months are anticipated to deteriorate as the cold winter weather is expected to have a further impact on demand and logistics.
The Market Growth Index continued its fall during October, signalling worsening market conditions across the economy and the lowest level since April.
Likewise, the Product Sales Index registered the weakest pace in six months, with panellists reporting that reduced domestic demand continued to affect overall levels of product sales.
On the prices front, the Prices Charged Index fell to 39.5 in October from 40.0 in September. The index has now been below the 50.0 no-change mark for the past twelfth consecutive months, with panellists commenting on weak client demand as a key factor leading them to alleviate cost pressures and cut their prices for goods and services.
At the same time, staffing levels decreased further in October thereby taking the current sequence of job losses to eighteen months. The Staffing Index posted the lowest level since May and signalled that labour market conditions across the country remained weak. Panellists attributed this to the general fall in sales and market growth.
World Economics Chief Executive Ed Jones commented:
“The World Economics Headline SMI for Mongolia signaled worsening business conditions across the country in October. The decline in the headline figure was reflected in all of its five components. However, business confidence, market growth and product sales recorded the biggest declines. Employment levels also fell but continued to decline at a steady pace. Meanwhile, panelists reported a further reduction in their selling prices in order to alleviate cost pressures and boost sales demand. Overall, the economic situation remains challenging, with panellists anticipating lower economic activity over the coming months.”