Business optimism for the ongoing April-June quarter has slumped to its record low level, reflecting the plunge in business sentiment owing to the heightened uncertainty around the impact of Covid-19, according to a report.
The Dun & Bradstreet Composite Business Optimism Index stood at 49.40 per cent for Q2 2020 (April-June), a record low and worse than during the 2009 financial crisis. The index registered a decrease of 37 per cent as compared to the year-ago period.
“The index has dropped 7 per cent more than it did during the 2009 financial crisis. The near halt in almost all non-essential activities in the industrial and services sectors due to the nationwide lockdown has led to a fall in the optimism levels for net sales and new orders to the lowest level in 18 years,” Dun & Bradstreet Chief Economist Arun Singh said.
The survey noted that the optimism for net profits stood at 48 per cent – a decrease of 21 percentage points as compared to same period last year, while optimism for new orders stood at 24 per cent – a decrease of 39 percentage points as compared to April-June 2019.
Singh further noted that the impact of Covid-19 started as a supply shock but has also triggered strong demand shocks and has led to the collapse of confidence levels.
“The ripple effects of this are evident across the financial sector. The deceleration in demand is expected to cause severe crunch in cashflows, increase in corporate debt levels could even lead to large scale credit defaults and trigger bankruptcies,” Singh said.
The report further said that all six optimism indices like — optimism for sales volumes, net profit, selling price, order book position, inventory and workforce size — have registered a decline on a year-on-year basis.
The Dun & Bradstreet Business Optimism Index is an indicator and is arrived at based on a quarterly survey of business expectations across companies from several sectors.