Business Optimism slips in Q2 2018

Business Optimism Index declines by 6.6% (q-o-q)

Highlights

• Dun & Bradstreet Composite Business Optimism Index stands at 85.0 during Q2 2018, a decline of 6.6% as compared to Q1 2018.
• Optimism for net profits stands at 62% - a decline of 5 percentage points as compared to Q1 2018
• Optimism for selling price stands at 36% - a fall of 10 percentage points as compared to Q1 2018
• Optimism for new order stands at 71% - a decline of 3 percentage points as compared to Q1 2018
• Optimism for employee stands at 42% - an increase of 4 percentage points as compared to Q1 2018

Mumbai, April XX, 2018: The Dun & Bradstreet Composite Business Optimism Index stands at 85.0 during Q2 2018, a decline of 6.6% as compared to Q1 2018. Four of the six optimism indices have registered a decline as compared to Q1 2018, while all six optimism indices have increased when compared to Q2 2017.

D&B's Composite Business Optimism Index:  Q2 2001 – Q2 2018

“Business Optimism in India slipped during the second quarter of 2018 as compared to previous quarter. The extent of banking fraud and its impact continue to unfold, and the tightening actions on LoUs and LoCs have led to reduced liquidity. Also, there is an apprehension of tighter regulatory and lending norms. Further, India is unlikely to remain immune to the saber-rattling and posturing by leaders that are key to global trade. Interestingly, when compared with the same quarter last year, optimism levels remain upbeat. The underlying dynamics for the growth momentum remain in place. The pick-up in credit deployment, despite the headwinds in the banking sector, is reassuring. There are also some signs of a broad-based growth in manufacturing, with construction goods, consumer non-durables and the capital goods sector witnessing high and stable growth rates over the past few months” said Manish Sinha, Managing Director – India, Dun & Bradstreet. He also added that “The caveats are that the balance sheet of the government and banks needs to be fixed. We expect that bank recapitalization will now have to be accompanied by tighter measures to address the loan frauds”.

76% of the respondents expect volume of sales to increase in Q2 2018 compared to 78% in Q1 2018, a decrease of 2 percentage points. While around 16% expect it to remain unchanged, 8% expect the volume of sales to decline.

62% of the respondents expect an increase in net profits in Q2 2018, compared to 67% in Q1 2018, a decline of 5 percentage points. Around 24% expect net profits to remain unchanged, while 14% expect it to decrease.

Around 53% of the respondents expect no change in the selling price of their products for Q2 2018 compared to 48% in Q1 2018. 36% of the respondents expect the selling price of their products to increase during Q2 2018, while 11% expect a decline.

71% of the respondents expect their order book position to improve in Q2 2018, compared to around 74% in Q1 2018. While around 22% of the respondents expect new orders to remain unchanged, 7% anticipate new orders to decrease.

42% of the respondents expect an increase in the size of their workforce employed during Q2 2018, as compared to 38% in Q1 2018. While around 52% anticipate no change in the number of employees, the remaining 6% expect their workforce size to decline.

Around 30% of the respondents expect their inventory level to increase during Q2 2018, as compared to 29% in Q1 2018. While around 53% anticipate no change in inventory level, 17% expect inventory level to decline.

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. All the respondents in the survey are asked six standard questions regarding their expectations as to whether the following critical parameters pertaining to their respective companies will register an increase, decline or show no change in the ensuing quarter as compared to the same quarter in the prior year: Volume of Sales, Net Profits, Selling Prices, New Orders, Inventories, and Employees. The individual indices are then calculated by the percentage of respondents expecting an increase.

For calculating the Composite Business Optimism Index, each of the five parameters (excluding inventory) 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 (2011). The parameter weights are then applied to these ratios and the results aggregated to arrive at the Composite Business Optimism Index.