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Trade Outlook
Business Sentiment Survey Aug 2017
August 08, 2017 08:57

Upbeat but risks remain

THE APRIL - MAY 2017 RESULTS:

In our latest survey, the overall measure of business sentiment, as reflected in the Business Sentiment Index (BSI), posted a modest decline of 2.1 percent to 140.2 after gaining 1.3 percent in the previous survey.

Our survey reveals growing concerns on a number of issues, particularly related to higher inflation, rising cost pressures and weaker pricing power.

On a more positive note, however, CEOs claimed slightly better profitability during the reporting months – this index added 2.7 percent to 110.4. Some relief appears to have been provided by lower COGS (this index was down 3.0 percent to 102.7) underpinned by a stable rupiah. For many companies, a stable currency is a boon since they are heavily dependent on imported raw materials.

Although noting the pick-up in inflation, CEOs are, surprisingly, more dovish on domestic interest rates. Only 28.3 percent of CEOs now expect higher rates, down from 34.1 percent in the previous survey.

With concerns surfacing over the health of the economy, CEOs were less satisfied with the performance of the government. In our survey, the overall measure of Business Confidence in the Government (BCGI) dropped 8.1 percent to 136.6.