Ahmedabad In an indication of the slowing down economy, the latest Business Inflation Expectations Survey (BIES) from the Indian Institute of Management - Ahmedabad (IIM-A) has revealed a subdued sales expectations coupled with the deterioration in profit margin expectations by the companies.
The monthly BIES survey is based on the responses of around 1,000 companies. The survey’s outcome indicates one-year ahead business inflation expectation steady around 4.70 per cent during September-November 2022, while giving clear signs of the economy slowing down amidst subdued sales expectations.
“With moderation in sales expectations, profit margin expectations have deteriorated sharply,” it noted.
The survey findings revealed that the percentage of firms reporting ‘much less than normal’ sales has sharply increased to 33 per cent in November 2022, from 26 per cent reported preceding month of October 2022.
It also noted that about 22 per cent of the firms reported sales to be ‘about normal, in November 2022, down from 25 per cent reported in October 2022.
On the profit margins, the survey revealed that more firms believe profit margins to be “much less than normal”. In November 2022, about 40 per cent firms felt so, up from 30 per cent reported in October 2022.
On costs front, the percentage of firms perceiving over 10 per cent cost increase year-on-year has further declined.
“Over 17 per cent of the firms in November 2022 round of the survey perceive that costs have increased very significantly (over 10 per cent) – down from 19 per cent recorded in October 2022,” the survey said.
One year ahead business inflation expectations, as estimated from the mean of individual probability distribution of unit cost increase, have remained steady around 4.70 per cent during September-November 2022, the survey noted.
However, a look at the outcomes of the surveys conducted for the same month in the previous two years 2020 and 2021 indicate more firms reporting “about normal” profit margins in November 2022. About 17 per cent firms reported “about normal” profit margins in November 2020, which improved to 20 per cent in November 2021 and about 24 per cent in November 2022.
On the sales expectations, more firms expect sales to be “much less than normal” in November 2022 at 33 per cent, up from 29 per cent firms in November 2021. But in November 2020 more firms i.e. about 37 per cent firms expected sales to be “much less than normal”.
BIES, conducted monthly at the Misra Centre for Financial Markets and Economy, IIMA, provides ways to examine the amount of slack in the economy by polling a panel of business leaders about their inflation expectations in the short and medium term.