Business Confidence Index drops 1.8pts to 52.7 in February

March 21, 2024 (MLN): The overall Business Confidence Index decreased by 1.8 points to 52.7 in February, the latest results of the 45th wave of the Business Confidence Survey (BCS), conducted by the State Bank of Pakistan (SBP) in collaboration with the Institute of Business Administration (IBA), revealed.

It is pertinent to note that this decrease is derived from both the Industry and the Services sectors.

The Industry sector BCI decreased by 0.7 points to 51.3 while for the Services sector, it decreased by 2.1 points to 53.2.

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)”

Current Business Confidence

The Current Business Confidence Index (CBCI), which is based on the general economic conditions in the country over the past six months, decreased by 2.4 points to 49.0 in February 2024 over the previous wave.

The Services sector is the major contributor to the decrease in CBCI for the current wave, which decreased by 3.1 points to 49.4 in the current wave.

Furthermore, the Industry sector CBCI decreased by 0.5 points to 47.6 in the current wave.

The disaggregation of responses shows a significant decrease in the positive and neutral views while the negative views increased in the current wave.

Expected Business Confidence

As far as the expectations regarding economic and business conditions in the next six months are concerned, a slight decline was observed in the Expected Business Confidence Index (EBCI) in February, 1.0 points to 56.5 in February 2024.

Both the Industry and Services sectors were the contributors for this change whose EBCI decreased by 0.7 and 1.0 points respectively in current wave.

The disaggregation of responses shows a slight decrease in the positive and neutral views, while the negative views increased in the current wave.

Purchasing Managers Index

On the other hand, the Purchasing Managers Index (PMI) increased slightly by 0.5 points to 49.6 in the current wave from the previous wave.

It is worth mentioning here that the PMI was last seen in the positive zone in June 2022.

The PMI’s disaggregation shows improvement in indices of three out of its five components in February 2024.

The highest increase of 4.2 points was observed in the number of raw material purchases followed by the total number of employees (1.2 points) and total order booked (1.0 points).

On the other hand, average supplier delivery times decreased by 3.2 points and firms’ business activities decreased by 0.4 points in the current wave.

Inflation Expectations

Regarding inflation, the survey revealed that Inflation Expectations (IE) increased by 4.9 points from the previous wave and reached 64.5 in February 2024.

Both the Industry and the Services sectors contributed to the increase in overall IE.

The Industry sector witnessed an increase of 5.7 points and the Services sector inflation expectations increased by 3.3 points in the current wave.

Employment

The survey also highlighted a drop in the Current Employment Diffusion Index by 2.1 points to 48.9 in the current survey wave on account of the decrease in the Services sectors.

The Current Employment Index for the Services sector decreased by 3.1 points in February 2024 from the previous wave.

Conversely, the Industry sector’s Current Employment Index increased by 1.2 points to 49.5 in February 2024 over the previous wave.

Capacity Utilization

The Average Current Capacity Utilization (ACCU)1 of the manufacturing sector (within the Industry sector) decreased by 7.2 percent to 65.3 percent in February 2024 from the previous wave.

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