Busi­ness con­fi­dence

The Pak Banker - - FRONT PAGE -

The lat­est SBP's Busi­ness Con­fi­dence Sur­vey has re­vealed that com­pa­nies' busi­ness con­fi­dence is pos­i­tive in the econ­omy as over­all Busi­ness Con­fi­dence In­dex ( BCI) surged to 55 in Au­gust 2018 as com­pared to 51 in June, 2018. This means that neu­tral views re­gard­ing busi­ness and eco­nomic con­di­tions as pre­vailed in June 2018 have turned pos­i­tive over the pe­riod. This pos­i­tive per­cep­tion of busi­nesses is slightly more pro­nounced for ser­vices but can be wit­nessed for both in­dus­try and ser­vices sec­tor of the econ­omy where the over­all busi­ness con­fi­dence in­dex has in­creased from 50 to 54 for in­dus­try and from 51 to 55 in the ser­vices sec­tor. The State Bank has started con­duct­ing the Busi­ness Con­fi­dence Sur­vey ( BCS) since FY18 at a bi- monthly fre­quency to ob­tain the views of se­nior man­agers of large com­pa­nies in the in­dus­try and ser­vices sec­tor.

The sur­vey pro­vides an op­por­tu­nity for busi­nesses to con­trib­ute di­rectly to the pol­icy for­mu­la­tion process by shar­ing their per­cep­tions of cur­rent and fu­ture eco­nomic and busi­ness con­di­tions. It pro­vides in­for­ma­tion to SBP re­gard­ing the per­cep­tions of com­pany man­ager's re­gard­ing cur­rent and ex­pected busi­ness con­di­tions and ma­jor fac­tors af­fect­ing these con­di­tions. It cov­ers both present views on pro­duc­tion, hir­ing of em­ploy­ees, de­mand for credit and eco­nomic con­di­tions, as well as their out­look. In Au­gust 2018 wave of the BCS, 444 firms suc­cess­fully com­pleted the sur­vey. SBP's head­line "Over­all Busi­ness Con­fi­dence" is com­posed of two sub- in­dices of "Cur­rent Busi­ness Con­fi­dence" and "Ex­pected Busi­ness Con­fi­dence". The per­cep­tions of re­spon­dents re­gard­ing both cur­rent and ex­pected eco­nomic and busi­ness con­di­tions have changed be­tween the last two waves.

The cur­rent busi­ness con­fi­dence in­dex has de­clined for both the in­dus­try and ser­vices sec­tors. For in­dus­try, it has de­clined from a level of 47 in June 2018 to 45 in Au­gust 2018. Sim­i­larly, for the ser­vices sec­tor it has changed from 48 to 46. For both the sec­tors pes­simistic views re­gard­ing the cur­rent busi­ness con­di­tions dom­i­nate the op­ti­mistic ones in the lat­est BCS wave of Au­gust 2018. The main driv­ing fac­tor for this de­cline in the cur­rent busi­ness con­fi­dence is the views of sur­vey re­spon­dents re­gard­ing the gen­eral eco­nomic con­di­tions in the coun­try over the last six months. There is also some mar­ginal de­te­ri­o­ra­tion in per­cep­tions re­gard­ing pro­duc­tion and em­ploy­ment.

The per­cent share of strong pos­i­tive views has de­clined from 6 in June 2018 to 3 in Au­gust 2018. Sim­i­larly, share of strong neg­a­tive views have de­clined from 14 per­cent to 11 per­cent be­tween the two waves. On the other hand, per­cent share of pos­i­tive, neu­tral and neg­a­tive views have in­creased by 2 per­cent each over the same pe­riod. Ex­pected Busi­ness Con­fi­dence re­vealed that there is a clear and pro­nounced in­crease in both ser­vices and in­dus­try. Fur­ther­more, the share of firms hav­ing pos­i­tive views of the cur­rent eco­nomic and busi­ness en­vi­ron­ment and for econ­omy and busi­ness con­di­tions in the next six month is sig­nif­i­cantly higher in Au­gust 2018 of 64 com­pared to 54 June 2018.

Con­trary to the case of cur­rent busi­ness con­fi­dence in­dex, de­tailed anal­y­sis of re­sults re­veal dif­fer­ent pat­terns of move­ment from shares of neu­tral, moder­ately neg­a­tive and strong neg­a­tive views to­wards moder­ately pos­i­tive and strong pos­i­tive views; from the last wave in June 2018 to the cur­rent wave of BCS con­ducted in Au­gust 2018. There is a sig­nif­i­cant pos­i­tive shift in the per­cep­tion of busi­nesses re­gard­ing fu­ture eco­nomic and busi­ness con­di­tions. In ad­di­tion to com­pil­ing the three busi­ness con­fi­dence re­lated in­dices, Pur­chas­ing Man­agers In­dex ( PMI) is also com­puted in line with best in­ter­na­tional prac­tices for each wave of BCS. PMI has ac­tu­ally de­clined marginally in Au­gust 2018; how­ever it is clearly in the pos­i­tive zone re­flect­ing the ro­bust busi­ness ac­tiv­ity of re­spond­ing firms over the last six months. The out­look for both cur­rent and ex­pected em­ploy­ment is pos­i­tive even though it has de­clined marginally for ser­vices sec­tor firms be­tween June and Au­gust 2018.

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