Businesses optimism sinks further, for the fourth straight quarter in Q2 2023

The Dun & Bradstreet Business Optimism Index declined by 24.3% (y-o-y) in Q2 2023 and by 5.5% on a q-o-q basis

Mumbai, May 19^th, 2023: The Dun & Bradstreet Composite Business Optimism Index stands at 73.1 for Q2 2023, a fall of 24.3% compared to Q2 2022. Five of the six subindices recorded a year-over-year decline. The Dun & Bradstreet Composite Business Optimism Index, which has been measuring the changing business sentiment of India Inc. since 2002, is a leading indicator of India’s overall growth, with ~80% correlation with India’s GDP.

Highlights

• Only 59% of respondents were optimistic regarding their volume of sales in Q2 2023, lowest in eight quarters.
• Optimism for net profits fell in Q2 3023, with only 44% respondents expecting net profits to increase in Q2 2023, lowest in three quarters.
• Optimism for new orders fell to a three-quarter low in Q2 2023, with only 58% respondents expecting new orders to increase.
• Optimism for hiring employees fell to a seven-quarter low in Q2 2023, with 47% indicating towards the hiring of new employees in Q2 2023.
• Respondents from the intermediate goods sector are the least optimistic in four out of six subindices.

Dun & Bradstreet's Composite Business Optimism Index:  Q2 2003 – Q2 2023

Note: Dun and Bradstreet Business Optimism Index (Base Year: 2011)

Arun Singh, Global Chief Economist, Dun & Bradstreet said, “Business optimism remained weak for the fourth straight quarter in Q2 2023 on a year-on-year basis. Stress in the global banking sector in the first half of March 2023 might have led to fears of contagion risk across financial markets, thereby impacting business sentiment. Businesses expressed less optimism for demand (eight-quarter low) and towards recruiting new employees (seven-quarter low) in Q2 2023. Further, a slowdown in demand for Indian goods from its key trading partners might have tempered the optimism levels of businesses. Goods and services exporters are facing a challenging year as the outlook for the world economy has become cautious. Optimism level seems to have been also impacted from waning away of pent-up domestic demand. Besides, business profits are likely to be affected by cost pressures connected to financing and labour”.

Key findings from the Q2 2023 survey

59% of the respondents expect volume of sales to increase in Q2 2023 compared to 76% in Q2 2022, a decrease of 17 percentage points. While 33% expect it to remain unchanged, 8% expect the volume of sales to decline.

58% of the respondents expect their order book position to improve in Q2 2023, compared to 72% in Q2 2022, a decline of 14 percentage points. While 34% of the respondents expect new orders to remain unchanged, 8% anticipate new orders to decrease.

44% of the respondents expect an increase in net profits in Q2 2023 compared to 65% in Q2 2022, a decrease of 21 percentage points. While 42% expect net profits to remain unchanged, 14% expect it to decrease.

37% of the respondents expect the selling price of their products to increase during Q2 2023, registering a decline of 15 percentage points compared to Q2 2022. 52% of the respondents expect no change, while 11% expect a decline in the selling price of their products in Q2 2023.

43% of the respondents expect their inventory level to increase during Q2 2023, an increase of one percentage point with respect to Q2 2022. While 47% anticipate no change in inventory level, 10% expect inventory level to decline.

47% of the respondents expect an increase in the size of their workforce employed during Q2 2023 compared to 56% in Q2 2022. While 47% anticipate no change, 6% expect their workforce size to decline.