Business Optimism Index declines by 2.6% (y-o-y)

Highlights

·   Dun & Bradstreet Composite Business Optimism Index stands at 78.9 during Q2 2017, a decrease of 2.6%  as compared to Q2 2016

·   Optimism for volume of sales stands at 71% - a decrease of 2 percentage points as compared to Q2 2016

·   Optimism for new orders stands at 68% - a decrease of 3 percentage points as compared to Q2 2016

·   Optimism for net profits stands at 59% - a decrease of 4 percentage points as compared to Q2 2016.

The Dun & Bradstreet Composite Business Optimism Index stands at 78.9 during Q2 2017, a decrease of 2.6% as compared to Q2 2016. Based on the responses received, five out of the six optimism indices have registered a decline as compared to Q2 2016.

D&B's Composite Business Optimism Index:  Q2 2001 – Q2 2017

Note: BOI Index is for new base (2011)

“With remonetisation causing currency in circulation to rise, the concerns of demonetisation are gradually dissipating and this is reflected in the moderate pickup in business confidence for Q2 2017 as compared to the previous quarter but remained down as compared to same quarter of previous year. The outcome of recent state election and the imminent materialisation of structural reforms in the form of the roll-out of the GST have also boosted investor confidence. Yet, the underlying weak consumption and investment demand continues to keep business sentiment subdued as compared to previous year’s level. Investment demand continues to remain muted with sizable under-utilisation of capacity in several industries. The volatility in IIP continues and the recovery in consumer-oriented sectors, which performed poorly for the third consecutive month in Feb 17, remains elusive. Moreover, while the imminent implementation of GST would bring ease to an otherwise complicated tax structure, it has triggered uncertainty amongst India Inc, particularly in the MSME segment, which may not be immediately geared up for the technological and other changes that GST would necessitate. This could have an impact on the business and production cycle in the initial period post roll-out of GST” said Dr Arun Singh, Lead Economist, Dun & Bradstreet India.

“Going forward, development on the implementation of GST along with the rising probability of El Niño and its implications for food inflation, and supply management measures will play a key role in shaping business sentiment” he added.

Around 71% of the respondents expect volume of sales to increase in Q2 2017 compared to around 73% in Q2 2016, a decrease of 2 percentage points. While 19% expect it to remain unchanged, 10% expect the volume of sales to decline.

Around 59% of the respondents expect an increase in net profits in Q2 2017, compared to around 63% in Q2 2016, a decrease of 4 percentage points. Around 30% expect net profits to remain unchanged, while 11% expect it to decrease.

Around 54% of the respondents expect no change in the selling price of their products for Q2 2017. Around 35% of the respondents expect the selling price of their products to increase during Q2 2017, while around 11% expect a decline.

Around 68% of the respondents expect their order book position to improve in Q2 2017, compared to around 71% in Q2 2016. While 24% of the respondents expect new orders to remain unchanged, the remaining 8% anticipate new orders to decrease.

Around 35% of the respondents expect an increase in the size of their workforce employed during Q2 2017, as compared to 40% in Q2 2016. While 57% anticipate no change in the number of employees, the remaining 8% expect their workforce size to decline.

Around 26% of the respondents expect their inventory level to increase during Q2 2017, as compared to 29% in Q2 2016. While around 61% anticipate no change in inventory level, 12% 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.

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