Fears over rising cost pressures

16 01 2008

In the October-November survey, the Business Sentiment Index (BSI) dropped by 9.4 percent to 122.6, snapping its upward streak in the last seven surveys. Both components of the BSI showed declines: the component measuring sentiment toward current situations, the Present Situations Index (PSI), dropping 8.8 percent and the component of the BSI measuring expectations over the next six months, the Expectations Index (EI), retreating 9.9 percent to 129.0.

CEOs still maintain that both business and corporate conditions are good: these two indices may have posted declines, yet they are still way above the 100 level. It is rather in regard to the current state of the overall economy where CEOs have the most concerns – the 15.3 percent fall in this index to just 80.5 brings it to a low not seen since the beginning of 2007. The seasonal holiday period reduced economic activity while rising energy prices – especially for oil and coal – are increasing costs for many businesses. Yet as the economy should quickly pick up following the Idul Fitri holidays, the CEO pessimism appears to be overdone. Read the rest of this entry »