Business Confidence registers sharpest drop in 2 years

Employment levels fall for 17 consecutive months

Companies continue to reduce prices charged

The World Economics Headline Sales Managers’ Index (SMI) for Mongolia 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. September’s reading remained well below the no-change mark of 50.0, posting 38.6, down from 40.8 in August. This signalled a sharper deterioration in business conditions and the lowest level since April. The index has now been in negative territory for the past nineteen months. An index above 50 indicates growth, while an index below 50 indicates contraction. The downward movement in the headline figure reflected four of its five components.

Business expectations remained negative during September linked to weak demand, high interest rates and uncertainty over commodity prices. The Business Confidence Index registered 40.3, down from 47.1 in August, the sharpest decline since October 2013. A reading above 50 indicates a general positive business outlook while an index below 50 indicates a general negative business outlook. According to the companies surveyed, business conditions over the coming months are anticipated to be hampered by tough domestic economic conditions.

The Market Growth Index fell further during September, signalling worsening market conditions across the economy and the lowest level since April. At the same time, the Product Sales Index registered the steepest decline since December 2014. Panellists mentioned that reduced domestic demand continued to affect overall levels of sales.

By contrast, the Prices Charged Index rose to 40.0 in September from 38.5 during August but nonetheless below the 50.0 no-change mark for the eleventh successive month. This indicated that prices charged continued to fall albeit at a slower rate compared to last month. Panellists attributed the fall in prices to continuing declines in global commodity prices such as those of gold, copper and coal.

In line with marked declines in both sales and market growth, the Staffing Index continued to fall in September and was little-changed from its value in August. This signalled an on-going weakness in labour market conditions across the country. Job losses have now been recorded in each of the past seventeen months.

Summary

World Economics Chief Executive Ed Jones commented:

“September’s SMI data for Mongolia suggests that business conditions deteriorated further across the country, with business confidence, market growth and product sales registering the biggest drops over this period. Staffing levels continued to fall sharply while prices charged fell albeit at a slower pace compared to last month. The general business outlook remains grim, with sales managers anticipating lower growth in the coming months.”