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Dun & Bradstreet survey finds decline in Business Optimism for Q3 2021

Optimism for hiring has increased to a six-quarter high in Q3 2021- Dun & Bradstreet

Highlights

  • The Dun & Bradstreet Composite Business Optimism Index stands at 74.2 for Q3 2021. The index increased by 20.7% (q-o-q) in Q3 2021
  • Optimism for volume of sales stands at 67%, an increase of 8 percentage points as compared to Q2 2021
  • Optimism for new orders stands at 57%, an increase of 1 percentage point as compared to Q2 2021
  • Optimism level for net profit stands at 48%, an increase of 6 percentage points as compared to Q2 2021
  • Optimism for the level of inventory stands at 42%, no change from Q2 2021
  • Optimism for selling price stands at 39%, an increase of 13 percentage points as compared to Q2 2021
  • Construction sector is the most optimistic on volume of sales, net profit and hiring of employees; consumer non-durables sector is the most optimistic on level of selling price and new orders; basic goods sector is the least optimistic on all parameters

Mumbai, July , 2021: The Dun & Bradstreet Composite Business Optimism Index stands at 74.2 for Q3 2021, an increase of 20.7% compared to the Q2 2021 survey. Five out of six optimism indices have registered an increase as compared to Q2 2021. The Dun & Bradstreet Composite Business Optimism Index, which has been measuring the changing business sentiment of India Inc. since 2002, is a leading indicator for India’s overall growth with a correlation co-efficient of 80% with the Gross Domestic Product (GDP).

Dun & Bradstreet's Composite Business Optimism Index:  Q1 2003 – Q3 2021

“Dun & Bradstreet’s latest analysis shows optimism amongst businesses for Q3 2021 has revived from the dip witnessed in the previous quarter as the COVID-19 positivity rate has gone below 5% indicating that the pandemic was under control. Optimism level improved as business activity picked up in June 2021 following fall in cases, gradual withdrawal in restrictions along with increase in vaccination.”. Our COVID-19 Commerce Disruption Tracker showed that around 32% of businesses in India were disrupted by 3rd week of June 2021, from close to 50% of businesses that were disrupted in the 3rd week of May 2021. The support measures announced by the RBI and the government to meet the credit needs of the MSMEs and the sectors affected by COVID-19 are expected to have further supported the optimism level of businesses.

“Favorably, the turnaround in the optimism level of firms is likely to boost the employment levels. After remaining subdued since Q3 2020, optimism for hiring has increased to a six-quarter high in Q3 2021. Our survey reveals that input price pressures are likely to prevail in the near term, which is expected to either weigh on profits or raise final prices. While firms in the consumer non-durables sector are the most optimistic about increasing the selling price of goods, optimism about selling price is very low amongst firms in the basic goods sector. However, overall optimism around selling price is the highest since Q2 2018. The revival in optimism is led by the large firms while optimism of small firms across all six parameters lag behind both; the medium and large firms”.

“The optimism index, however, remains below the level witnessed during the first quarter of 2021. Given the high correlation between the business optimism levels and the GDP growth, recovery in economic growth is thus expected to remain tepid in Q3 2021 and will lack the momentum witnessed at the starting of the year” said Arun Singh, Global Chief Economist, Dun & Bradstreet.

Key findings from the Q3 2021 survey

67% of the respondents expect volume of sales to increase in Q3 2021, as compared to 59% in Q2 2021, an increase of 8 percentage points. While 19% expect it to remain unchanged, 14% expect the volume of sales to decline.

48% of the respondents expect an increase in net profits in Q3 2021, as compared to 42% in Q2 2021, an increase of 6 percentage points. 33% expect net profits to remain unchanged, while 19% expect it to decrease.

48% of the respondents expect no change in the selling price of their products in Q3 2021. 39% of the respondents expect the selling price of their products to increase during Q3 2021, while 13% expect a decline.

Around 57% of the respondents expect their order book position to improve in Q3 2021, as compared to 56% in Q2 2021, an increase of 1 percentage point. While around 23% of the respondents expect new orders to remain unchanged, around 20% anticipate new orders to decrease.

42% of the respondents expect their inventory level to increase during Q3 2021, no change from the levels seen in Q2 2021. While another 42% anticipate no change in inventory level, 16% expect inventory level to decline.

36% of the respondents expect an increase in the size of their workforce employed during Q3 2021, as compared to 28% in Q2 2021, an increase of 8 percentage points. While 57% anticipate no change in the number of employees, 7% expect their workforce size to decline.

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