A study conducted by the Indian Institute of Management, Ahmedabad (IIM-A), has revealed persistent pessimism among corporates over subdued sales conditions.

The Business Inflation Expectations Survey (BIES) – conducted on 1941 companies, mostly in the manufacturing sector in March 2018 – revealed that 28 per cent of the firms in the sample reported that sales are ‘much less than normal’ in the month of March 2018.

Fall in profits

The survey also revealed that the trend has been quite stable during the last four months. “Over half of the firms in the sample continue to report that sales levels are much or somewhat less than normal,” the report noted.

The pessimism was also reflected in the responses on profit margins as around 44 per cent of the firms in the sample in March 2018 indicated ‘much less than normal’ profit margins.

Inflation expectation

“Over 65 per cent of firms continue to report squeezing of profit margins. This proportion has remained more or less stable during last four months. Perception of higher profit margins in the current economic conditions is not supported by data,” the report added.

The March 2018 survey revealed one year ahead business inflation expectation, as estimated from the mean probability distribution of unit cost increase and placed it at 3.73 per cent, showing a decline from 3.85 per cent observed in February 2018.

Regarding cost perceptions, the data in March 2018 does not indicate significant increase in costs.

Market monitoring

BIES provides ways to examine the amount of slackness in the economy by polling a panel of business leaders about their inflation expectations in the short and medium term. This monthly survey asks questions about year-ahead cost expectations and the factors influencing price changes, such as profit, sales levels.

IIM-A introduced the BIES in May 2017 and BIES-March 2018 is the 11th round of the survey.

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