Costs up, sales down, profits muted: IIM-A surveys 1100 business honchos

By Our Representative
The Indian Institute of Management-Ahmedabad’s (IIM-A’s) latest Business Inflation Expectations Survey (BIES) has said that about 54% of the firms are “still reporting ‘somewhat less than normal’ or lower sales in March 2024”, up from 52% reported in February 2024, adding, overall the survey of 1,100 business executives suggests that profit margin expectations too have remained “slightly muted.”
BIES, says the survey report, provides ways to examine the amount of slack in the economy by polling a panel of business leaders about their inflation expectations in the short and medium term, even as asking them “questions about year-ahead cost expectations and the factors influencing price changes, such as profit, sales levels, etc.”
Claiming to be a unique survey in that it goes “straight to businesses -- the price setters -- rather than to consumers or households to understand their expectations of the price level changes”, the report says, “It provides an indirect assessment of overall demand condition of the economy.”

According to the report, “Results of this Survey are useful in understanding the inflation expectations of businesses and complement other macro data required for policy making.” The survey is carried out every monthly at the Misra Centre for Financial Markets and Economy, IIM-A, by selecting companies “primarily from the manufacturing sector."
According to the report, “The cost perceptions data in March 2024 indicate mild increase in cost pressures. However, the percentage of firms perceiving very significant cost increase (over 10%) in March 2024 has increased to 16%, from around 13% reported in February 2024.”
It adds, “The percentage of firms reporting moderate cost increase (3.1% to 6.0%), on the other hand, has remained around 29% during February-March 2024.”

Coming to the sales, the report states, “The sales expectations scenario during February-March 2024 remained similar. Around 18-19% of the firms are reporting ‘somewhat greater than normal’ sales, and about 54% of the firms are still reporting ‘somewhat less than normal’ or lower sales in March 2024 – marginally up from 52% reported in February 2024.
"Normal" means as compared to the average level obtained in the preceding 3 years, excluding the Covid-19 period.
Further, says the report, “Around 42% of the firms in March 2024 are reporting profit margins to be ‘about normal’ or greater – marginally up from 40% reported in February 2024”, adding, “Overall, the profit margins expectations have remained somewhat muted during January-March 2024.”

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