Information and Analytical Content of the Business Climate Monitoring of Services

The paper explores the potential application of results of business climate monitoring of services in Russia to analyze development levels of the sector under review and Russian economy in general. Source data - are the 2012 Q1 - 2018 Q4 results. These data are summarized in the traditional composite index of business confidence, and alternative business climate indicator calculated using principal component analysis. To examine the reaction of GDP to impulses in the business climate indicator the Vector Autoregression Model was used.

The results of services surveys provide reliable information on the economic sentiment that is essential to measure recession and recovery development of the sector. Since 2013, the survey’s results demonstrate a stable negative trend in the indicators dynamics. The slight increase in entrepreneurial optimism in 2016-2018 did not result in moving confidence to a positive zone. Aggregate entrepreneurial  estimates show weak and unstable demand on services driven by a long-term decline in household real disposable income. A more extended observation period needs to conclude the BCI cyclic properties; however, it can be used now to analyze the development of the Russian services sector.

Calculations of the business climate index in the service sector showcase that it reflects changes in the growth rate of the GDP physical volume recorded by official statistics more sufficiently than the traditional index of entrepreneurial confidence (taking into account the simultaneous correlation). The insufficient length of the time-series of survey results so far limits the ability to extract and analyze the cyclic profile of a composite indicator. The authors, however, proposed using the principal component analysis to construct an alternative composite index to analyze the economic development of the services sector.

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