Data from the RSBI SME Business Activity Index in October shows a deterioration in sentiment in the sector. Although actual performance of SMEs remained in growth territory, expectations of future profits and continued availability of debt financing deteriorated markedly. Due to the increase in the key rate, fewer and fewer entrepreneurs could receive loans in October, while businesses expect cooling and consumer activity – as a result, SMEs are already reporting a reduction in investment programs. Central Bank data indicate a credit boom in the SME sector in August-September – small businesses sought to “jump on the last car” before a new rate increase.
In October, the RSBI index (calculated by PSB, Opora Rossii and NAFI based on a survey of 1.8 thousand companies) dropped to 54.2 points after 55.2 points in September. Let us recall that from spring to July the indicator grew due to business optimism: entrepreneurs noted the revival of consumer activity and expanded investment programs in response. After the first round of key rate increases at the end of July, the dynamics began to gradually unfold. In August-September, conditions for SMEs still remained comfortable, despite the weakening of the ruble and the increase in the key rate – their effect was expected later.
In October, the health of the sector noticeably worsened. Almost all components of the index fell (sales, loans and investments), only hiring showed growth: SMEs, despite the shortage of personnel, managed to expand their staff – 14% of companies reported this (the maximum since 2020). The study’s authors attribute the results to the adaptation of SMEs and “identifying new levers to attract employees.” However, these gains may not be sustainable: the share of SMEs planning to downsize has also increased, from 5% to 7%. The reason is uncertainty in the market and the expected reduction in financial indicators.
According to RSBI, compared to September, in October the share of entrepreneurs reporting revenue growth remained unchanged (20%), while reports of its reduction became slightly less (30% versus 31%). Future earnings estimates are the worst since winter 2023. Their reduction is expected by 27% of SMEs (25% in September), growth – only 23% (31%), which is explained by an increase in the key rate – Central Bank data for October showed the first signs of a cooling in domestic demand and lending activity (see Kommersant on 13 November and “Today’s date”).
Small and medium-sized businesses sharply increased their loan portfolio in August-September, as follows from Central Bank data. In September, it reached 1.6 trillion rubles, plus 44.9% for the year, which the Central Bank previously explained by the desire of companies to take out loans before raising rates, as well as seasonal demand for loans from government contract executors – before paying for contracts closer to the end of the year.
In October, as follows from RSBI data, lending conditions for SMEs remained acceptable, but the share of satisfied demand began to decline: 13% of respondents reported loan approval versus 15% a month earlier. As before, 14% of SMEs reported having a loan. “Against the backdrop of changes in monetary policy, we note increased pessimism among entrepreneurs regarding investment,” said PSB Vice President Kirill Tikhonov. Thus, the share of SMEs ready to expand their business decreased from 28% to 24%. However, only 5% of respondents are currently planning to downsize their business.
Medium-sized businesses feel most confident, showing growth in October. This segment, experts note, is more resistant to increases in the key rate due to greater involvement in preferential lending. Small and micro businesses turned out to be more vulnerable to changes. In terms of industry, the largest decline was observed in the manufacturing sector due to a reduction in the share of SMEs that already have loans and less optimism about business expansion. Indices in the trade and services sectors also showed a slight decline, being at the same level due to worsening estimates of future sales.