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Download D&B Q4 2004 Optimism Index for India

Q4 2004: D&B Business Optimism Index dampened by inflationary concerns

Mumbai, October 25, 2004

Dun & Bradstreet India today released its Business Optimism Index (BOI) for India for the period Oct-Dec (Q4) 2004. The D&B Business Expectations Survey for Q4 2004 was conducted in September 04, amidst concerns over rising inflation numbers. The Survey for Q4 2004 reveals that business confidence has declined compared to the previous quarter.

The Composite Business Optimism Index for Q4 2004 declined by 23% to 107.8 from 140.1 in the previous quarter. For Q4 2004, five out of six optimism indices, namely volume of sales, net profits, selling prices, inventory levels and employees, declined compared to the previous quarter. This decline stems from uncertainty about the economic situation, owing to concerns over high oil prices and spiralling inflation. The optimism index for new orders, however, showed a slight improvement.

The corporate sector showed a slight decline in its expectations about future sales prospects. Nearly 74% of the survey's respondents expect sales volumes to increase in Oct-Dec 04 while just over 5% expect a decline in sales. The resultant Optimism Index for Volume of Sales stands at 69%, as compared to 73% in the previous quarter. The basic goods and consumer non-durables sector were the most optimistic about an increase in sales volume.

The Optimism Index for Net Profits stands at 52%, compared to 69% in the previous quarter. This decline however, is mainly due to a large number of respondents anticipating no change in net profits for the forthcoming quarter. While 57% of the survey's respondents expect their net profits to go up in the forthcoming quarter, 5% expect profits to fall. The consumer non-durables sector was the most positive about an increase in profitability, followed by the services sector.

Nearly 20% of the survey's respondents expect selling prices of their products to go up during Oct-Dec 04. While a large majority of the respondents (about 73%) anticipate no change in the selling price, about 7% expect prices to decline. The resultant Optimism Index for Selling Prices stands at 13%, which is a decline of 5 percentage points compared to the previous quarter.

There was a slight improvement on the new orders parameter. About 79% of the respondents expect their order book position to improve, while only 2% expect a decrease in new orders. The resultant Optimism Index for New Orders stands at 77%, which is 4 percentage points more than the previous quarter's figure. The services sector was the least optimistic about an increase in the number of orders.

23% of the survey's respondents expect their level of stocks to increase while 9% expect their stocks to decline in Oct-Dec 04. The resultant Optimism Index for Inventory thus stands at 14% as compared to 20% for the previous quarter. Also, 23% of the respondents intend to increase the number of their employees while only 4% of the respondents expect a decline in their employee size for the Oct-Dec 04 quarter. The resultant Optimism Index for Employees has declined to 19% for Q4 2004 as compared to 27% in the previous quarter.

"The Survey's findings reflect the uncertainty associated with the effects of higher oil prices on the domestic economy," said Mr. Rajesh Mirchandani, Chief Executive Officer, Dun and Bradstreet - South Asia & Middle East. "Going forward, the Government's success in tackling inflationary pressures will be a key factor in determining business confidence over the next quarter".

The D&B 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. Respondents to the survey are asked six standard questions regarding whether specified parameters viz., net sales, net profits, selling prices, new orders, inventories and employee levels, will register an increase, decline or show no change in the ensuing quarter as compared to the corresponding quarter of the previous year. The indices are then calculated by subtracting the percentage of respondents expecting decreases from those expecting increases.

For calculating the Composite Business Optimism Index, each of the six parameters 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 (Q2 1999). The parameter weights are then applied to these ratios and the results aggregated to arrive at the Composite Business Optimism Index.

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Download D&B Q4 2004 Optimism Index for India