Russia business confidence, and other things

 I've been off-line, more or less, due to medical issues, plus I also wanted to work on my Visual Basic programs, adjusting my seasonal adjustment programs to handle time series which go negative.  The latter took a lot of work, because the assumption that time series were positive (e.g, the PMI, or industrial production, say) was embedded in all sorts of small but crucial software segments.  Also, Visual Basic makes the strange assumption that zero ('0')is the same thing as 'empty', which it most emphatically isn't.  It took me hours to discover this!

Why did I want to be able to seasonally and extreme adjust time series which go negative?  Because I wanted (specifically) to analyse the Russian business confidence data, partly as part of my attempt to estimate the Russian PMI prior to 2011 (my data stop there) and partly because it will be interesting to see just how deep business confidence falls in Russia as the war progresses and sanctions bite, and (generally) because one does from time to time need to seasonally and extreme adjust time series which go negative. 

The chart below shows the original (unadjusted) data for business confidence plus my calculation of the seasonally and extreme adjusted data.  Note the very strong seasonal cycle, with business confidence plunging in winter and recovering in summer (why?  I know Russian winters are bad, but ....)  Also, business confidence has been more or less negative for the last decade-plus.  Which is consistent with the sharp decline in US$ GDP since 2013, after the annexation of Crimea. (GDP chart second below; note optimistic forecast for 2022 GDP!) 

Source: Trading Economics
If the 2011-2013 growth rate had continued, Russia's GDP would now be *double* what it is now.  Does Putin understand that in the long run, power comes from economic not military might?  That his yearning for great power status would come from sustained economic growth?  But that would imply the end of the kleptocracy, and we can't have that, can we?

How does business confidence compare with the PMI for Russia?  I show that in the chart  below.  I expect both the PMI and business confidence to fall sharply over the next 6 to 12 months.  How much of this is due to oil?  The oil price fell sharply during the GFC (2009), but recovered almost to previous highs  between 2010 and 2015, so the plunge in GDP and business confidence/PMI was due to the relatively mild sanctions imposed after the Crimean annexation, not oil.  The new sanctions are strong and will cut deep into Russia's exports.  In real (volume) terms, Russian GDP fell 10% in 2009.  I expect the downturn this time to be worse, and the recovery more sluggish.    

I'll keep you posted.