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Business sentiment continues to improve: D&B India

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Announcement Corporate

D&B Business Optimism Index for Q3 2010 stands at a two year high of 150

Highlights

 

  • Composite Business Optimism Index for Q3 2010 rose to 150.0 from 132.1 in Q3 2009, recording an increase of almost 13.6% (y-o-y)
  • On a q-o-q basis, the index recorded an increase of 5% (q-o-q) as compared to 3.8% (q-o-q) in the previous quarter
  • Resultant Optimism for Volume of Sales stands at 76%, an increase of 2 percentage points as compared to the previous quarter
  • Resultant Optimism for Net Profits stands at 67%, a marginal increase of around 1 percentage point as compared to the previous quarter
  • Resultant Optimism for Selling Prices stands at 28%, 4 percentage points lower compared to the previous quarter.
  • Resultant Optimism for New Orders stands at 78% in Q3 2010, an increase of 5 percentage points as compared to the previous quarter.

The Dun & Bradstreet Composite Business Optimism Index for Q3 2010 rose to a two year high of 150.0 from 132.1 in Q3 2009, recording an increase of almost 13.6% (y-o-y). On a q-o-q basis the index recorded an increase of 5% (q-o-q) as compared to 3.8% (q-o-q) in the previous quarter. Based on the responses received, it was observed that five out of the six optimism indices – namely, volume of sales, net profits, new orders, inventory levels and employee levels have registered an increase as compared to the previous quarter. Only one out of the six optimism indices – selling prices– declined by 4 percentage points as compared to the previous quarter.

 

“Sustained improvement in the BOI, which is now at a two year high, is reflective of the continuous strengthening of confidence amongst the corporates. Robust growth in industrial production, stabilising domestic consumption-demand, rapidly growing investment-demand coupled with increase in imports and exports seems to have supported growing business confidence. Improvement in hiring intentions of the corporates, as reflected in a 10 quarter high resultant Optimism for Employees, is a positive development and augurs well for the future growth prospects of the economy. However, India Inc remains cautious regarding their profit expectations, as margins are likely to be under pressure on account of high input prices and rising interest rates” said Kaushal Sampat, President & CEO, Dun & Bradstreet – India. “Going forward, the impact of inflation and rising interest rates on domestic demand conditions will be crucial in determining business expectations. Also, the advancement of monsoon and how it pans out during the rest of the season would play an important role in shaping business sentiment in the near future. The developments surrounding the debt crisis in some European countries would also cast their influence on business sentiment going forward” he added.

Majority of the BOI respondents expect demand conditions to improve in the forthcoming quarter. While 81% of the respondents expect an increase in volume of sales, 5% of the respondents anticipate volume of sales to decline in Q3 2010. Around 14% of the respondents expect volume of sales to remain unchanged. The resultant Optimism for Volume of Sales stands at 76%, an increase of 2 percentage points as compared to the previous quarter.

Profit expectations of the Indian corporates remained muted, with the resultant Optimism for Net Profits recording a marginal increase of 1 percentage point during Q3 2010 as compared to the previous quarter. However, the resultant Optimism for Net Profits which stands at 67% recorded an increase of 8 percentage points as compared to Q3 2009. While 74% of the respondents anticipate an increase in their net profits during Q3 2010, 7% of the respondents expect their net profits to decline.

Majority of the respondents (52%) from all the sectors anticipate no change in the selling prices of their products during the forthcoming quarter. While about 38% of the respondents expect selling prices of their products to increase in Q3 2010, 10% of the respondents expect a decline in the level of selling prices. The resultant Optimism for Selling Prices stands at 28% for Q3 2010, a decline of 4 percentage points as compared to the previous quarter.

Demand conditions are expected to witness significant improvement in the medium to long term, with as many as 81% of the respondents anticipating their order book position to improve. While 16% of the respondents anticipate no change in their order book positions, only 3% of the respondents expect a decline in new orders received during Q3 2010. The resultant Optimism for New Orders stands at 78% for Q3 2010, an increase of 5 percentage points compared to the previous quarter.

While around 39% of the respondents expect to witness an increase in their inventory levels during Jul-Sep 2010 quarter, as many as 44% of the respondents anticipate no significant change from the current situation. Almost 17% of the respondents expect their level of stock to decline during Q3 2010. The resultant Optimism for Inventory Levels stands at 22%, reflecting an increase of about 4 percentage points compared to the previous quarter.

The employment scenario is expected to improve in the Jul-Sep 10 quarter, with majority (52%) of the respondents expecting the size of their work force to increase and only 3% of the respondents expecting a reduction in the work force. The remaining 45% of the respondents intend to keep the number of employees unchanged. The resultant Optimism for Employees stands at 49% for Q3 2010 recording an increase of almost 10 percentage points as compared to the previous quarter.

 

 

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First Published: Jul 08 2010 | 11:38 AM IST

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