The Business Inflation Expectations Survey (BIES) 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. This monthly survey asks questions about year-ahead cost expectations and the factors influencing price changes, such as profit, sales levels, etc. The survey is unique 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. One major advantage of BIES is that one can get a probabilistic assessment of inflation expectations and thus get a measure of uncertainty. It also provides an indirect assessment of overall demand condition of the economy. Results of this Survey are, therefore, useful in understanding the inflation expectations of businesses and complement other macro data required for policy making. With this objective, the BIES is conducted monthly at the Misra Centre for Financial Markets and Economy, IIMA. A copy of the questionnaire is annexed.
Companies are selected primarily from the manufacturing sector. Starting in May 2017, the “BIES – September 2022” is the 65th round of the Survey. These results are based on the responses of around 1000 companies.
A. Inflation expectations
- One year ahead business inflation expectations in September 2022, as estimated from the mean of individual probability distribution of unit cost increase, have declined by 35bps to 4.74% from 5.09% reported in August 2022.The trajectory of one year ahead business inflation expectations.
- The uncertainty of business inflation expectations in September 2022, as captured by the square root of the average variance of the individual probability distribution of unit cost increase, has sharply increased to 2.11%.
B. Costs
- The cost perceptions data indicates signs of moderation in price pressures. In this round, the cost pressure of the reporting firms shifts from very significant increase (over 6%) to moderate increase (3.1% to 6%)
- The percentage of firms perceiving over 10% cost increase y-o-y has declined. Over 21% of the firms in September 2022 round of the survey perceive that costs have increased very significantly (over 10%) – down from 26% recorded in August 2022.
C. Sales Levels
- Firms’ sales expectations have sharply improved. Percentage of firms reporting ‘somewhat less than normal’ sales has declined to 24% in September 2022 from 32%reported in August 2022.
- Around 27% of the firms in September 2022 report that sales are ‘about normal’, sharply up from 19% reported in August2022
D. Profit Margins
- Profit margins expectations have improved marginally. Over 34% of the participating firms in the survey perceive profit margins are ‘somewhat less than normal’ – down from 36% reported in the earlier round of the survey