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 2023” is the 77th round of the Survey. These results are based on the responses of around 1100 companies.
A. Inflation expectations
One year ahead business inflation expectation, as estimated from the mean of individual probability distribution of unit cost increase, has marginally increased to 4.39% in September 2023, from 4.32% reported in August 2023. Average inflation expectation of the firms remained anchored around 4.3% for the past five consecutive months. The trajectory of one year ahead business inflation expectations is presented in Chart 1.
The uncertainty of business inflation expectations in September 2023, as captured by the square root of the average variance of the individual probability distribution of unit cost increase, has remained high around 2.1%.