D&B Business Optimism Index down by 8.8%

The Dun & Bradstreet Composite Business Optimism Index stands at 156.2 during Q1 2012, a decline of 8.8% as compared to Q1 2011. Based on the responses received, it was observed that five out of the six optimism indices – namely, Volume of Sales, Net Profits, Selling Prices, New Orders and Employee Levels have registered a decrease as compared to Q1 2011.

“Fears of further deterioration of the global economic situation and continued political gridlock on economic reforms have taken a severe toll on business sentiment. The continued weakening of rupee coupled with significant downward revision in the exports data by government have also added to the heightened uncertainty. The prevailing sentiment is truly exemplified in the D&B Business Optimism Index for Q1 2012, which has declined by as much as 8.8% as compared to Q1 2011. Each of the six optimism indices reflects a subdued outlook, with the indices for Net Profits, Volume of Sales and New Orders being lower by over 25% as compared to last year”, said Kaushal Sampat, President & CEO, Dun & Bradstreet – India. “Going forward, policy responses to the global turmoil, RBI’s monetary policy stance in the next policy review and the Government’s proposals for the corporate sector in the forthcoming Union Budget would play a key role in determining business expectations over the next quarter. Moreover, success in breaking the political impasse on key legislation will also be a pre-requisite for improving business sentiment in upcoming quarters” he added.

The cautiousness of the corporates on the profit front is reflected in the resultant Optimism for Net Profits (51%), which stands at an 11-quarter low in Q1 2012. Around 66% of the respondents expect their net profits to increase, while 15% anticipate a decline in net profits. About 19% of the respondents expect their net profits to remain unchanged.

Expectations on demand conditions for Q1 2012 are significantly lower as compared to last year. Around 76% of the respondents expect their volume of sales to increase, while 12% expect it to remain unchanged. The remaining 12% anticipate sales volume to decline during Q1 2012. The resultant Optimism for Volume of Sales stands at 64% - a decrease of 26 percentage points compared to Q1 2011.

Around 53% of the respondents expect the selling prices of their products to increase during Q1 2012, while another 35% expect to see no change. Only 12% anticipate selling prices to decline. The resultant Optimism for Selling Prices at 41% is three percentage points lower as compared to Q1 2011.

About 75% of the respondents expect improvement in their order book position during Q1 2012, while 10% anticipate new orders to decline. The remaining 15% expect no change in their order book position. The resultant Optimism for New Orders stands at 65%, a decrease of 25 percentage points on a y-o-y basis.

Almost 49% of the respondents expect the level of inventory to increase during Q1 2012. While 13% of the respondents expect their level of stock to decline, the remaining 38% expect the level of stock to remain unchanged. The resultant Optimism for Inventory Level stands at 36% – reflecting no change when compared to Q1 2011.

A significant 47% of the respondents anticipate no change in the size of their workforce employed during Q1 2012. While 47% of the respondents expect the size of their workforce to increase, the remaining 6% of the respondents anticipate the number of employees to reduce. The resultant Optimism for Employees stands at 41%, a decrease of 12 percentage points when compared to Q1 2011.