Dun & Bradstreet Business Optimism decreased in Q2 2020

Dun & Bradstreet Quarterly Business Optimism Survey finds a record low for Q2 2020 in the Composite Business Optimism Index

Highlights

·         The Dun & Bradstreet Composite Business Optimism Index (BOI) stands at 49.40% during Q2 2020, a record low and worse than during the 2009 financial crisis. The index declined by 37.00% year-on-year (y-o-y) in Q2 2020

·         Optimism for net profits stands at 48.00% - a decrease of 21 percentage points as compared to Q2 2019

·         Optimism for new orders stands at 24.00% - a decrease of 39 percentage points as compared to Q2 2019

·         Optimism for volume of sales stands at 44.00 - a decrease of 30 percentage points as compared to Q2 2019

Mumbai, April 20, 2020:

The Dun & Bradstreet Composite Business Optimism Index stands at 49.40% during Q2 2020, a decrease of 37.00% as compared to the Q2 2019 result of the survey. The Index is based on a quarterly survey of business across a range of sectors. All six optimism indices of optimism for sales volumes, net profit, selling price, order book position, inventory and workforce size have registered a decline y-o-y basis.

The Dun & Bradstreet Business Optimism Index is an indicator and measure of the pulse of the business community. The index is arrived at based on a quarterly survey of business expectations across companies from several sectors like basic goods, capital goods, intermediate goods, consumer durables, consumer non-durables and service sectors.  The Dun & Bradstreet Composite Business Optimism Index has been measuring the changing business sentiment of India Inc. since 2002 and is recognised by the industry as leading indicator for India’s overall growth with a correlation co-efficient of around 80% with the Gross Domestic Product (GDP).

D&B's Composite Business Optimism Index:  Q4 2002 – Q2 2020

“Dun & Bradstreet’s Composite Business Optimism Index registered a record low for the period Apr - Jun 2020, reflecting the sharp fall in business sentiment owing to the heightened uncertainty around the impact of COVID-19. The index has dropped 7% more than it did during the 2009 financial crisis. The near halt in almost all non-essential activities in the industrial and services sectors due to the nation-wide lockdown has led to a fall in the optimism levels for net sales and new orders to the lowest level in 18 years. The impact of COVID-19 started as a supply shock but has also triggered strong demand shocks and has led to the collapse of confidence levels. The ripple effects of this are evident across the financial sector. The deceleration in demand is expected to cause severe crunch in cashflows, increase in corporate debt levels could even lead to large scale credit defaults and trigger bankruptcies” said Arun Singh, Chief Economist, Dun & Bradstreet.

Key findings from Dun & Bradstreet’s Business Optimism Survey:

44% of the respondents expect volume of sales to increase in Q2 2020 compared to 74% in Q2 2019, a decrease of 30 percentage points. While 51% expect it to remain unchanged and 5% expect the volume of sales to decline.

48% of the respondents expect an increase in net profits in Q2 2020, compared to 69% in Q2 2019, a decrease of 21 percentage points. 38% expect net profits to remain unchanged, while 14% expect it to decrease.

75% of the respondents expect no change in the selling price of their products for Q2 2020. 16% of the respondents expect the selling price of their products to increase during Q2 2020, while 9% expect a decline.

24% of the respondents expect their order book position to improve in Q2 2020, compared to 63% in Q2 2019, a decrease of 39 percentage points. While 65% of the respondents expect new orders to remain unchanged, 11% anticipate new orders to decrease.

27% of the respondents expect their inventory level to increase during Q2 2020, as compared to 39% in Q2 2019. While 60% anticipate no change in inventory An level, 13% expect inventory level to decline.

Around 34% of the respondents expect an increase in the size of their workforce employed during Q2 2020 compared to 40% in Q2 2019, a decrease of 10 percentage points. While around 54% anticipate no change in the number of employees, around 12% expect their workforce size to decline.