A long road ahead for the re­turn of busi­ness con­fi­dence

Mint Asia ST - - Mark To Market -

The Nikkei In­dia Pur­chas­ing Man­agers’ In­dex (PMI) for Oc­to­ber 2017 shows an im­prove­ment in the ser­vices sec­tor, but busi­ness op­ti­mism re­mains muted. Con­sider the ac­com­pa­ny­ing chart, which has the Man­u­fac­tur­ing (Fu­ture Out­put) In­dex of PMI, a mea­sure of busi­ness sen­ti­ment among man­u­fac­tur­ers and the Ser­vices (Busi­ness Ex­pec­ta­tion) In­dex, a yard­stick of sen­ti­ment among ser­vice providers.

In Oc­to­ber 2017, busi­ness con­fi­dence among man­u­fac­tur­ers was the low­est since Fe­bru­ary this year, while that for ser­vices firms was the least since June. The sur­vey says that for the man­u­fac­tur­ing sec­tor, “Busi­ness con­fi­dence re­gard­ing the prospects for out­put growth over the next 12 months eased to the weak­est since Fe­bru­ary…op­ti­mism was linked by pan­el­lists to ex­pec­ta­tions of GST (goods and ser­vices tax) benefits be­ing re­alised. Pes­simistic pro­jec­tions were firmly rooted in fore­casts of neg­a­tive im­pacts of GST.” In the ser­vices sec­tor, while sen­ti­ment

DROOP­ING AN­I­MAL SPIR­ITS

85 75 65 55 45 82.8 7 73.8 Apr 2012 Man­u­fac­tur­ing (Fu­ture Out­put In­dex) Ser­vices (Busi­ness Ex­pec­ta­tion In­dex) weak­ened, “more than 16% of pan­el­lists ex­pected greater ac­tiv­ity, which they widely linked to pro­jected longer-term benefits of GST”.

Sim­ply put, busi­ness con­fi­dence cur­rently is linked to the view busi­ness­men have of the im­pact of GST. Note that the PMI sur­vey is of 57.6 57.5 the largest firms in the pri­vate sec­tor and small firms don’t find a place.

Sen­ti­ment should im­prove as the GST dis­rup­tion eases, but the chart should serve as a re­minder of the dis­tance to be trav­elled be­fore busi­ness con­fi­dence re­turns to the high lev­els last seen in 2012.

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