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Q1 2009 : D&B Business Optimism Index |
| Q1 2009 : D&B Business Optimism Index drops to 95.7 - the lowest since its introduction in Q4 2002 |
| Business sentiment in India drops to record low |
| Mumbai, January 13, 2009 Highlights
Mumbai, January 13, 2009: The Dun & Bradstreet Composite Business Optimism Index for Q1 2009 fell to 95.7 – the lowest value the index has registered since it was introduced in Q4 2002. As compared to the previous quarter, the Composite Business Optimism Index declined by as much as 31.1% - a record fall. On a y-o-y basis, the BOI recorded its largest ever decrease of 43%.
D&B's Composite Business Optimism Index: Q1’03 – Q1’09 Based on the responses received, it is observed that all the six optimism indices, namely volume of sales, net profits, new orders, inventory levels, selling prices and employee levels have declined as compared to the previous quarter. “The increase in downside risks to growth prospects of the Indian economy, coupled with waning domestic and international demand, has hampered the business sentiment significantly. The tight credit condition, which prevailed in the economy at the time of the survey, has also dented the corporate sentiments to a certain extent. Further, the recent terror attack in Mumbai has also impacted confidence negatively. The crisis of confidence faced by the economy in general and the business community in particular is reflected in the record low of 95.7 touched by the BOI in Q1 2009”, said Kaushal Sampat, Chief Operating Officer, Dun & Bradstreet – India. “Going forward, external cues and policy actions taken by the Government and their impact on the domestic demand conditions will play a key role in determining business expectations over the next quarter” he added. Demand conditions are expected to deteriorate significantly during the Jan-Mar 09 quarter. While about 47% of the respondents anticipate an increase in sales volume, as many as 24% of the respondents expect the sales volume to decline in Q1 2009. The resultant Optimism Index for Volume of Sales stands at 23% - lowest since Q1 2002. This represents a decline of as much as 45 percentage points as compared to the previous quarter. Profit expectation for Q1 2009 has also plunged. Approximately 47% of the respondents expect an increase in profits during Q1 2009, while as many as 24% of the respondents anticipate a fall in their net profits in the forthcoming quarter. The resultant Optimism Index for Net Profits stands at 23% - a six and a half year low. This represents a decrease of as much as 38 percentage points compared to the previous quarter. With the moderating demand conditions and an across the board reduction in CENVAT (except for petroleum products), many respondents expect the selling price to decline in Jan-Mar 09. While about 27% of the respondents expect the selling price of their products to increase, about 24% expect to witness a decline in selling prices during the Jan-Mar 09 quarter. However, a majority of respondents (49%) anticipate no significant change in the prevailing prices. The resultant Optimism Index for Selling Prices stands at 3% - a decline of as much as 30 percentage points from Q4 2008. Dropping domestic demand also led to a decline of as much as 42 percentage points (q-o-q) in the Optimism Index for New Orders, which stands at a seven year low of 26%. With a large number of manufacturers opting for rationalising inventory while reducing current production in the wake of subdued demand conditions, a significant proportion of respondents are expecting their level of stock to decline in Q1 2009. While around 22% expect to witness a decline in the inventory level, around 31% of the respondents expect an increase in their level of stock in Q1 2009. The resultant Optimism Index for Inventory Levels stands at approximately 9%, reflecting a decrease of 27 percentage points from Q4 2008. A significant softening of the job market has pulled the resultant Optimism Index for Employees to a four year low of 21% for the Jan-Mar 09 quarter; this is a decrease of around 12 percentage points as compared with the previous quarter. About the D&B Business Optimism Index The D&B Business Optimism Index is widely recognised as an indicator, which measures the pulse of the business community and serves as a reliable benchmark for investors. The index is arrived at on the basis of a quarterly survey of business expectations. The survey is conducted on a sample of companies that are selected randomly from D&B’s commercial credit file. The sample selected is a microcosmic representation of the country’s business community and includes companies from several sectors including basic goods, capital goods, intermediate goods, consumer durables, consumer non-durables and service sectors. Respondents to the survey are asked six standard questions regarding whether specified parameters viz., net sales, net profits, selling prices, new orders, inventories and employee levels, will register an increase, decline or show no change in the ensuing quarter as compared to the corresponding quarter of the previous year. The indices are then calculated by subtracting the percentage of respondents expecting decreases from those expecting increases. For calculating the Composite Business Optimism Index, each of the six parameters is assigned a weight. The positive responses for every parameter for the period under review are expressed as a proportion of positive responses in the base period (Q2 1999). The parameter weights are then applied to these ratios and the results aggregated to arrive at the Composite Business Optimism Index. About Dun & Bradstreet (D&B): Dun & Bradstreet (NYSE:DNB), the world’s leading source of global business information, knowledge and insight, has been enabling companies to Decide with Confidence® for 165 years. D&B’s global commercial database contains more than 135 million business records. The database is enhanced by D&B’s proprietary DUNSRight® Quality Process, which transforms the enormous amount of data collected daily into decision-ready insight. Through the D&B Worldwide Network – an unrivaled alliance of D&B and leading business information providers around the world –customers gain access to the world’s largest and highest quality global commercial business information database. Customers use D&B Risk Management Solutions to mitigate risk, increase cash flow and drive increased profitability, D&B Sales & Marketing Solutions to analyse markets, locate prospects and increase revenue from new and existing customers; D&B Export Marketing Solutions to gain significant insight into overseas markets and increase sales; D&B Financial Education Solutions to facilitate professional growth and excellence among their executives and D&B Economic Analysis Group to derive pragmatic and solution-oriented analyses of strategic economic and business developments, thereby aiding informed decision making. D&B features on FORTUNE Magazine's Most Admired Companies Industry List, ranking first in the Financial Data Services category. 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