D&B Business Optimism Index for Q1 2010 increases by as much as 43.4% (y-o-y)
Highlights
- Composite Business Optimism Index for Q1 2010 recorded an increase of 43.4% (y-o-y) as compared to an increase of 3% in the previous quarter.
- The BOI for Q1 2010 stood at 137.3 lower compared to 143.2 in the previous quarter
- Resultant Optimism for Volume of Sales stands at 80%, an increase of 3 percentage points as compared to the previous quarter.
- Resultant Optimism for Net Profits stands at 76%, an increase of around 10 percentage points as compared to the previous quarter
- Resultant Optimism for Selling Prices stands at 19% as compared to 23% in the previous quarter.
- Resultant Optimism for New Orders stands at 80%, an increase of around 3 percentage points as compared to Q4 2009.
The Dun & Bradstreet Composite Business Optimism Index for Q1 2010 witnessed an increase of as much as 43.4% (y-o-y) as compared to 3% (y-o-y) in the previous quarter. While this could be partly attributed to the low base effect, it also points toward improving corporate optimism. However, the Composite Business Optimism Index for Q1 2010 stands at 137.3, lower compared to 143.2 in Q4 2009. This need not be viewed as an indication of moderation in business optimism, given that on a q-o-q basis, the optimism for most of the parameters have improved barring selling prices and inventory levels. Moreover, comparatively lower optimism in the level of selling prices and inventory is an outcome of majority of the respondents expecting selling prices and inventory levels to remain unchanged rather than to decline. This also signifies the stabilising positive business sentiment prevalent in the economy. While the Optimism for volume of sales, net profits and new order has increased compared to the previous quarter, the Optimism for employee levels has remained unchanged during Q1 2010 compared to the previous quarter.
“An increase in the Composite Business Optimism Index by as much as 43.4% (y-o-y) corroborates the fact that the Indian economy is firmly on the revival path. Improving domestic demand, surge in domestic stock markets, uptick in advance tax collection, improving employment situation, increased capital inflows and stabilising export demand are likely to have supported the optimism in the business sentiment. Out of the six parameters, three parameters, viz., volume of sales, new orders, net profits have shown wide-spread and substantial improvement over the previous quarter”, said Kaushal Sampat, Chief Operating Officer, Dun & Bradstreet – India. “Going forward, the policy announcements in the forthcoming budget will be crucial in determining business expectations over the next quarter. Mounting inflationary pressures are emerging as significant downside risk to growth; thus the panning out of inflation in the ensuing quarters would also affect business sentiment. While the RBI is likely to consider monetary intervention to tackle inflationary pressures, the impact this would have on interest rates would play an important role in shaping business sentiment in the near future.” he added.
Majority of the BOI respondents expect demand conditions to improve in the forthcoming quarter. While as many as 83% of the respondents anticipate an increase in sales volume, around 3% of the respondents anticipate a decrease in sales during Q1 2010. Around 14% of the respondents expect the sales volume to remain unchanged. The resultant Optimism for Volume of sales stands at 80%, an increase of 3 percentage points as compared to the previous quarter.
Profit expectations of the Indian corporate sector improved further, with the resultant Optimism index for Net Profits recording an increase of 10 percentage points during Q1 2010 as compared to the previous quarter. While as many as 79% of the respondents expect their net profits to increase, about 3% of the respondents are anticipating a fall in their net profits during Q1 2010. Around 18% of the respondents expect no change in net profits during Q1 2010. The resultant Optimism for Net Profits stands at 76% as compared to 66% in the previous quarter.
Majority of the respondents from all the sectors expect no significant change in the prevailing prices during the forthcoming quarter. About 63% of the respondents do not expect to witness any change in selling price of their products. While about 28% of the respondents expect selling prices of their products to increase, about 9% expect to witness a decline in their selling prices during the Jan-Mar 10 quarter. The resultant Optimism for Selling Prices stands at 19% as compared to 23% in the previous quarter.
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Demand conditions are expected to witness significant improvement in the medium to long term, with as many as 83% of the respondents anticipating their order book position to improve. While around 3% of the respondents expect a decrease in the number of new orders, about 14% expect no change in their order book position during Q1 2010. The resultant Optimism for New Orders stands at 80%, an increase of around 3 percentage points as compared to Q1 2010.
While around 29% of the respondents expect to witness an increase in their inventory levels during Jan-Mar 2010 quarter, as many as 53% of the respondents anticipate no significant change from the current situation. Almost 18% of the respondents expect their level of stock to decline in the Jan-Mar 10 quarter. The resultant Optimism for Inventory Levels stands at approximately 11%, reflecting a decline of about 13 percentage points from the previous quarter.
The employment scenario is expected to improve with only 1% of the respondents expecting a decline in number of employees. While as many as 44% of the respondents anticipate an increase in number of employees during Q1 2010, a majority (55%) of the respondents intend to keep the number of employees unchanged. The resultant Optimism for Employees stands at 43% for the Jan-Mar 10 quarter, unchanged compared with the previous quarter.