December 10, 2020 (MLN): The overall business confidence improved further by 3 points and reached two years high to 55 points in October 2020, from 52 points in August 2020.
The latest results of the 19th wave of Business Confidence Survey (BCS), conducted by State Bank of Pakistan (SBP) in collaboration with the Institute of Business Administration (IBA), revealed that the sentiments of the business community remained in positive zone for second consecutive wave, which reflects optimistic views of business sector regarding enhancement in economic activities in Pakistan. Resultantly, Business Confidence Index (BCI) increased in October 2020, as shown in the figure below.
The survey results reflect the continued optimism across all sectors in general and particularly in the industry and services sector as the perceptions for both improved in positive zone. The Business confidence Index for industry, increased from 51 in August 2020 to 55 in October 2020; and for services sector, sentiments improved from 52 to 55.
According to the survey report, the headline index “Overall Business Confidence” is comprised of two sub-indices; “Current Business Confidence Index (CBCI)” and “Expected Business Confidence Index (EBCI)”. The opinion of participants of BCS on account of current economic and business conditions moved upward, though still in negative zone. The expectations regarding economic and business conditions in the next six months remained same in the positive area.
The CBCI improved further within negative zone from 42 in August 2020 to 49 in the current wave. This improvement in current business confidence was derived from both industry as well as services sectors. CBCI of industry sector increased significantly from 39 in August 2020 to 51 in October 2020, which shows the shifting of perceptions of businesses from negative zone to positive zone since June 2018. As far as services sector is concerned, it jumped from 43 in August 2020 to 48 in current wave of survey collection, report highlighted.
On the other hand, EBCI remained same at 62 in October 2020 as in the last wave. The expected business confidence of the industry sector slightly dropped from 63 in August 2020 to 60 in October 2020, while for the services sector EBCI surged from 62 to 63.
As far as Purchasing Managers Index (PMI) is concerned, which had been in the negative zone for the last eight waves, entered in the green zone in October. The PMI increased significantly from 45 in August 2020 to 53 in October 2020. As per the survey report, the increase in PMI index value is attributable to increase in the firm’s business activities, surge in firm’s total order books, and rise in purchasing of raw material by the firms.
In addition to this, the perceptions about employment also improved as the Current Employment Diffusion Index improved slightly from 47 in the last wave to 49 now, while Expected Employment improved marginally from 56 in August 2020 to 57 in the current wave.
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