Earnings expectations remain subdued due to sharp cost increases and sluggish sales: IIM-A survey

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The latest Business Inflation Expectations Survey (BIES) from the Indian Institute of Management-Ahmedabad (IIM-A), which provides means to examine the level of economic downturn by polling a panel of business leaders said the data on cost perceptions indicates “persistent high cost pressures.
Stating that more than 66% of companies participating in the survey perceive a significant increase (more than 6%) in costs over the four consecutive months, the BIES report however states: “The percentage of companies perceiving an increase in costs above 10% year-on-year has slowly declined.. Over 34% of companies in the May 2022 round of the survey believe that these costs have increased very significantly (over 10%) – compared to 39% registered in February 2022.”

Conducted by the Misra Center for Financial Markets and Economics, IIM-A, based on responses from around 1,000 companies, and claiming to be unique “in that it goes directly to companies — those who set prices — rather than to consumers or households, to understand their expectations,” the latest survey says, “Business expectations for sales have moderated. The percentage of businesses reporting sales that were “a little below normal” increased sharply, from 27% in April 2022 to 34% in May 2022.”
Even pointing out that “about 23% of businesses in May 2022 report sales as ‘about normal,’ compared to 28% reported in April 2022,” the survey, a monthly affair, says: “Over the past five last consecutive rounds, about 4/5ths of the companies in the sample reported profits “much lower or slightly lower than normal”.

The survey also notes: “Business one-year inflation expectations in May 2022 fell sharply by 44 basis points to 5.58%, from 6.02% reported in April 2022. There are early warning signs of a decrease in business inflation expectations, after remaining close to or above 6. % from January to April 2022.” However, “the uncertainty of business inflation expectations in May 2022 remained around 2 .1%, identical to that reported in February-April 2022”.

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