Resultant Optimism Index for Volume of Sales lowest in 13 quarters; Optimism for Net Profits lowest in 12 quarters
Business optimism is on the decline reflecting the concerns that industry faces today. In fact the Dun & Bradstreet Composite Business Optimism Index, a measure of business sentiment has witnessed a decline of 5.2% as compared to Q3 2011 and stands at 136.1 during Q3 2012. Based on the responses received, it was observed that five of the six optimism indices – namely, Volume of Sales, Net Profits, New Orders, Inventory Levels and Employee Levels have registered a decrease as compared to Q3 2011.
Expectations on demand conditions for Q3 2012 are subdued as compared to Q3 2011. Around 64% of the respondents expect their volume of sales to increase, while 23% expect it to remain unchanged. The remaining 13% anticipate sales volume to decline during Q3 2012. The resultant Optimism for Volume of Sales stands at 51% - a decrease of 17 percentage points compared to Q3 2011 and when compared on a q-o-q basis. The resultant Optimism is the lowest in the last 13 quarters.
The decline in optimism of the corporates on the profit front is reflected in the resultant Optimism for Net Profits (50%), which stands at a 13-quarter low in Q3 2012. Around 63% of the respondents expect their net profits to increase. A significant 24% anticipate their net profits to remain unchanged, while the remaining 13% expect a decline in net profits. The resultant Optimism for Net Profits stands at 50% - a decrease of 12 percentage points compared to Q3 2011 and six percentage points lower compared to Q2 2012. Amongst the sectors, the capital goods and the services sectors were relatively less optimistic.
Around 45% of the respondents expect the selling price of their products to increase during Q3 2012. While around 5% of the respondents anticipate the selling prices to decline, 50% of the respondents expect no change in selling prices. The resultant Optimism for Selling Prices stands at 40% - an increase of 10 percentage points as compared to Q3 2011.
Around 72% of the respondents expect their order book position to improve during Q3 2012. While 19% of the respondents anticipate no change in the new orders received, the remaining 9% of the respondents expect new orders to decline. The resultant Optimism for New Orders received stands at 63% – a decrease of 7 percentage points when compared to Q3 2011 and when compared on a q-o-q basis.
Around 45% of the respondents expect the level of stock to remain unchanged during Q3 2012, while as many as 39% of the respondents expect the level of inventory to increase. The remaining 16% of the respondents expect their level of stock to decline. The resultant Optimism for Inventory Level stands at 23% – a decrease of 7 percentage points when compared to Q3 2011.
More than half of the respondents (57%) anticipate no change in the size of their workforce employed during Q3 2012. Approximately 39% of the respondents anticipate the size of their workforce to increase, while about 4% of the respondents anticipate the number of employees to reduce. The resultant Optimism for Employees stands at 35%, the lowest in the last 12 quarters.
“The D&B Business Optimism Index for Q3 2012 has plunged yet again, extending this year’s downward spiral, as the unstable global and domestic economic environment takes its toll on domestic firms. The Domestic business environment continues to be plagued by challenges such as high inflation, sluggish policymaking environment, rising input costs, high interest rates and heightened uncertainty in the global economy. The index reveals that businesses are more pessimistic than they have been in three years, about prospects for sales, orders and profits. Going forward, even marginal policy actions could go a long way in propping up business sentiment. Further, the progress of monsoon will also be critical in shaping business sentiment and influencing the pace of food inflation.”
— Kaushal Sampat, President & CEO - India, Dun & Bradstreet