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.