Key points:
➢ The highest uncertainty in the 3-month perspective was recorded among exporters, 20.7%
➢ The share of enterprises planning to scale down operations over a 2-year horizon rose to 5%, but 95% do not expect a decline or foresee growth
➢ Labor shortages remain the main obstacle — 63% of businesses noted this issue
➢ The second most common obstacles were safety risks and rising prices
➢ Power outages remain a relatively minor issue — only 7% mentioned it
Most key indicators of business sentiment remained stable in May. The Business Activity Recovery Index remained unchanged from April at 0.13. The aggregated indicator of industrial prospects, which reflects short-term expectations, slightly declined to 0.11 from 0.12 in March–April.
These are the findings of the 37th monthly survey conducted by the IER among 474 industrial enterprises.
Uncertainty in the three-month outlook remained unchanged primarily for key production indicators.
“However, we recorded the highest level of three-month uncertainty among exporters. Every fifth exporter — 20.7% — currently does not know what their export dynamics will be over the next 3–4 months,” said IER Executive Director Oksana Kuziakiv.
Uncertainty decreased over longer horizons — 6-month and 2-year periods. Currently, only 28.7% of respondents find it difficult to predict their activities two years in advance. This is the lowest share since at least October 2022, when 42.3% of businesses reported uncertainty.
“In May, the share of those planning to reduce their enterprise’s activity over two years increased to 5%. This is still a small number, though higher than April’s 1.4%. Nearly 80% don’t foresee major changes. In fact, 95% of respondents indicate that they will either remain unchanged or experience slight growth. Considering the instability, security, and economic challenges Ukraine faces, this is a very good result,” said Oksana Kuziakiv.
The share of enterprises that increased production in May fell from 26.2% to 19.5%, while the share of those that reduced output grew from 10% to 13.5%. The share of businesses planning to increase production in the next 3–4 months slightly declined, from 40.8% to 39.9%.
The total share of enterprises operating at full or near-full production capacity slightly increased in May, from 62% to 63%.
“In January this year, the share of those operating at over 75% of capacity rose significantly. Since then, it has remained relatively unchanged. For example, in May, 53% of companies were in this category,” noted Oksana Kuziakiv.
Expectations for new orders remain cautious: the share of companies with order portfolios longer than a year slightly decreased, from 16% to 15%. On average, the duration of new orders increased from 4.9 to 5 months.
“This happened because the share of those with orders for just one to two months declined from 33% to 24%. Likely, these orders were redistributed: some now work ‘on the fly,’ others shifted into the three-to-five month category,” explained Oksana Kuziakiv.
The labor shortage problem remains pressing: in May, the share of companies struggling to find skilled workers rose to 49.8% (+2 percentage points), and those struggling to find unskilled workers rose to 36.7% (+0.4 percentage points).
Labor shortages due to military draft and/or employee emigration remain not only the main wartime obstacle for businesses but also an increasingly widespread issue.
“Labor shortages remain the number one obstacle. In May, the weight of this problem rose by six percentage points, to 63%,” reported IER senior research fellow Yevhen Angel.
In May, the top three obstacles remained unchanged, though the percentage shares shifted. The issues “unsafe working conditions” and “rising prices for raw materials, goods, and components” were equally cited by 47% of respondents.
“For more than half a year, over half of the respondents pointed to safety risks, reaching 62% in October. But in May, this issue became somewhat less prominent. The survey was conducted in the second half of May, and respondents had not yet experienced the mass shelling by the aggressor state during the last two weeks. This may have affected their assessment. Likely, in June, its relevance will rise again,” said Yevhen Angel.
The issue of power outages remains low on the list of obstacles.
“In May, 7% of respondents mentioned it, up from 6% in April, moving the issue from 9th to 8th place. But it remains at the bottom of the priority list,” said Yevhen Angel. According to the survey, in April, 15% of businesses temporarily suspended operations due to outages, 50% experienced no outages, and 34% continued operating despite interruptions.
No significant changes were recorded in other categories, except for “supply chain disruptions,” which rose from 9% to 15%.
Evaluations of government economic policy remain mostly neutral: in May, 64% held neutral views, almost a quarter (24%) were negative, and 4% were positive. Only 8% were undecided.
The New Monthly Enterprises Survey (#NRES) by IER covers about 500 Ukrainian industrial enterprises located in 21 of 27 Ukrainian regions. The survey has been conducted monthly since May 2022.
🎥 Video presentation of the May survey results (Ukrainian language) —
https://www.youtube.com/watch?v=tY7J0MFunDU
📊 All past surveys since July 2022 —
http://www.ier.com.ua/en/proekt_dilova_dumka/NRES_Presentations
