Business confidence declines in Q3 2017

Business Optimism Index declines by 13.3% (y-o-y) 

Highlights

·         Dun & Bradstreet Composite Business Optimism Index stands at 72.1 during Q3 2017, a decrease of 13.3%  as compared to Q3 2016

·         Optimism for volume of sales stands at 63% - a decrease of 15 percentage points as compared to Q3 2016

·         Optimism for new orders stands at 65% - a decrease of 5 percentage points as compared to Q3 2016

·         Optimism for net profits stands at 55% - a decrease of 16 percentage points as compared to Q3 2016.

Mumbai, July 24, 2017: The Dun & Bradstreet Composite Business Optimism Index stands at 72.1 during Q3 2017, a decrease of 13.3% as compared to Q3 2016. Based on the responses received, four out of the six optimism indices have registered a decline as compared to Q3 2016. 

D&B's Composite Business Optimism Index:  Q2 2001 – Q3 2017

Note: BOI Index is for new base (2011)

"D&B Composite Business Optimism Index during Q3 2017 declined by 13.3% as compared to the previous year quarter as companies are gearing up to comply with new GST regime. While the GST roll out has been rightly lauded for the significant benefits in streamlined taxation, realising the benefits will need India Inc to execute well. Given the scale of the changes, our respondents are factoring into their scores teething issues in the short-run: learning the intricacies of the new tax regime, adjusting to the input tax credit and logistics of the GST system. Further, whilst bigger companies are largely geared up for the transition, the same cannot be said for the SMEs who could see their costs escalate to ensure compliance. These issues during the survey period could have played a role in dampening business confidence. Further, concerns related to future demand conditions and weak new investment demand could have also operated as binding constraints on business sentiment. These perceptions are seen in responses to four out of the six optimism indices: score on volume of sales, net profits, new orders and selling prices have declined as compared to Q3 2016. We expect that the short-term issues surrounding GST implementation should fade over the course of the year and production processes would get aligned with the new framework which would help in reviving business confidence as the benefits from the GST regime boost the economy’s growth and rating prospects” said Manish Sinha, Managing Director – India, Dun & Bradstreet. “Going forward, the progress of monsoon will also be critical in shaping business sentiment and influencing the pace of rural demand.” he added.

Around 63% of the respondents expect volume of sales to increase in Q3 2017 compared to around 78% in Q3 2016, a decrease of 15 percentage points. While 27% expect it to remain unchanged, 10% expect the volume of sales to decline.

Around 55% of the respondents expect an increase in net profits in Q3 2017, compared to around 71% in Q3 2016, a decrease of 16 percentage points. Around 30% expect net profits to remain unchanged, while 15% expect it to decrease.

Around 57% of the respondents expect no change in the selling price of their products for Q3 2017. Around 27% of the respondents expect the selling price of their products to increase during Q3 2017, while around 16% expect a decline.

Around 65% of the respondents expect their order book position to improve in Q3 2017, compared to around 70% in Q3 2016. While 25% of the respondents expect new orders to remain unchanged, the remaining 10% anticipate new orders to decrease.

Around 36% of the respondents expect an increase in the size of their workforce employed during Q3 2017, as compared to 34% in Q3 2016. While 56% anticipate no change in the number of employees, the remaining 8% expect their workforce size to decline.

Around 31% of the respondents expect their inventory level to increase during Q3 2017, as compared to 22% in Q3 2016. While around 54% anticipate no change in inventory level, 15% 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.

About Dun & Bradstreet (D&B):

Dun & Bradstreet (NYSE: DNB) grows the most valuable relationships in business. By uncovering truth and meaning from data, we connect customers with the prospects, suppliers, clients and partners that matter most, and have since 1841. Nearly ninety percent of the Fortune 500 and companies of every size around the world, rely on our data, insights and analytics.

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