Costs up, profits down, sales 'neutralise': IIM-A surveys of top business executives

 Cost perceptions

By A Representative
The Indian Institute of Management-Ahmedabad's (IIM-A's) latest Business Inflation Expectations Survey (BIES), which seeks to provide ways to examine the amount of slack in the economy by polling a panel of business leaders, has said that the cost perceptions data indicates "hardening of cost pressures".
It said, in September, "Over 59% of the firms perceive significant (over 6%) cost increase, as against 55% reported in the earlier round", which took place in August, adding, "Around 35% of the firms perceive that costs have increased very significantly (over 10%) – further up from the responses received earlier in August 2021. For the first time, over 1/3rd of the firms reported more than 10% cost increase."
At the same time, it said, "Around 48% of the firms in the sample in September 2021 report ‘much less than normal’ profit – up from 44% reported in August 2021", adding, "About 15% of the firms now report that profit expectations of ‘about normal’ – down from 17% reported in August 2021."

 Profit perceptions

However, ironically, BIES said, "Sales expectations have further improved. Around 33% of the firms in September 2021 reported that sales are ‘much less than normal’, as compared to 36% reported in August 2021", noting that "the instance of only 1/3rd of the firms expecting ‘much less than normal’ was reported last in May 2019."
Taking an overview, it said, "Overall improvement in sales is overshadowed by the cost increase. As a result, profit expectations have remained subdued", pointing out, "One year ahead business inflation expectations in August 2021, as estimated from the mean of individual probability distribution of unit cost increase, have increased sharply by 53 basis points to 5.75% from 5.22% reported in September 2021."
It added, "The uncertainty of business inflation expectations in September 2021, as captured by the square root of the average variance of the individual probability distribution of unit cost increase, has also increased sharply to 2.2% from around 1.9% reported during July-August 2021."