Dun & Bradstreet survey finds Business Optimism for Q3 2020 at a record low

Highlights

• The Dun & Bradstreet Composite Business Optimism Index stands at 29.4 for Q3 2020, a record low. The index declined by 40.6% (q-o-q) in Q3 2020
• Optimism for net profits stands at 27% - a decrease of 21 percentage points as compared to Q2 2020
• Optimism for new orders stands at 22% - a decrease of 2 percentage points as compared to Q2 2020
• Optimism for volume of sales stands at 24% - a decrease of 20 percentage points as compared to Q2 2020

Mumbai, August 4, 2020: The Dun & Bradstreet Composite Business Optimism Index stands at 29.4 for Q3 2020, a decrease of 40.6% as compared to the Q2 2020 survey. All six optimism indices have registered a decline as compared to the previous quarter. The Dun & Bradstreet Composite Business Optimism Index, which has been measuring the changing business sentiment of India Inc. since 2002, is a leading indicator for India’s overall growth with a correlation co-efficient of 80% with the Gross Domestic Product (GDP).

“Dun & Bradstreet’s Composite Business Optimism Index (BOI), which had registered a record low in Apr-June 2020, fell further for the period Jul-Sept 2020. The spike in the number of positive COVID-19 cases, the extension of lockdown in containment zones and the staggered easing of restrictions affected the business optimism levels. The plethora of containment and non-containment zones, which are near-impossible to track in real time, and the rapid change in guidelines adopted by the various local governments has led to considerable uncertainty amongst businesses that are planning to resume their operations.  Muted credit disbursements might have also affected the optimism levels. While various measures have been taken to support flow of capital to businesses, bank credit to industries continued to remain subdued. Adding to the issues, states like West Bengal and Odisha have been severely impacted by the super cyclone ‘Amphan’, while floods have affected millions in the state of Assam. The India China border conflicts have also added to the uncertainty in the business environment. The steep fall in the business sentiment indicates the concern amongst businesses about the delay in the full-fledged recovery of the economy”, said Arun Singh, Global Chief Economist, Dun & Bradstreet.

Key findings from the survey

Around 24% of the respondents expect volume of sales to inrease in Q3 2020, as compared to 44% in Q2 2020, a decrease of 20 percentage points. Around 52% expect it to remain unchanged, while around 24% expect the volume of sales to decline.

Around 27% of the respondents expect an increase in net profits in Q3 2020, as compared to 48% in Q2 2020, a decrease of 21 percentage points. Around 35% expect net profits to remain unchanged, while around 38% expect it to decrease.

72% of the respondents expect no change in the selling price of their products in Q3 2020. 10% expect the selling price of their products to increase during Q3 2020, while 18% expect a decline.

22% of the respondents expect their order book position to improve in Q3 2020, as compared to 24% in Q2 2020, a decrease of 2 percentage points. While 49% of the respondents expect new orders to remain unchanged, 29% anticipate new orders to decrease.

9% of the respondents expect their inventory level to increase during Q3 2020, as compared to 27% in Q2 2020. While 71% anticipate no change in inventory level, 20% expect inventory level to decline.

16% of the respondents expect an increase in the size of their workforce employed during Q3 2020 compared to 34% in Q2 2020, a decrease of 18 percentage points. While 64% anticipate no change in the number of employees, 20% expect their workforce size to decline.

About the Dun & Bradstreet Business Optimism Index

The Dun & Bradstreet Business Optimism Index is an indicator and measure of the pulse of the business community. The index is based on a quarterly survey of business expectations.

The survey is conducted on a sample of companies that are selected randomly from commercial entities in Dun & Bradstreet’s Data Cloud. 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. All the respondents in the survey are asked six standard questions regarding their expectations as to whether the following critical parameters pertaining to their respective companies will register an increase, decline or show no change in the ensuing quarter as compared to the same quarter in the prior year: Volume of Sales, Net Profits, Selling Prices, New Orders, Inventories and Employees. The individual indices are then calculated by the percentage of respondents expecting an increase.

For calculating the Composite Business Optimism Index, each of the five parameters (excluding inventory) 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 (2011). The parameter weights are then applied to these ratios and the results aggregated to arrive at the Composite Business Optimism Index.