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Business firms to raise prices of final goods

The results of the PIDE Business Barometer are based on the views of selected 80 firms listed at the Karachi Stock Exchange (KSE) and broadly categorised as the financial and non-financial sectors.

According to details, only 7.8 per cent of the respondents reported a decrease in the prices of their inputs. A large number of them (84.4 per cent) indicated that their input prices increased in the second half of 2007, while 7.8 per cent reported no change.

For the current half of the year 2008, 93.5 per cent expect a rise in the prices of their inputs, while 4.8 per cent expect it to stay the same. Only 1.6 per cent of the firms expect a fall in the prices of their inputs.

In the case of the prices of final goods, 52.4 per cent of the respondents experienced an increase in the prices of their product during the second half of 2007. For 31.7 per cent, it remained the same, while for 15.9 per cent the prices fell from the first half of 2007.

The majority of the firms expect that the prices of their final products will increase during the first half of 2008. In the coming six months, 28.3 per cent firms expect that these will stay the same, 61.7 per cent firms expect that these are going to increase, while 10 per cent expect a fall in the prices of their products.

Final product prices would be even higher than the expectations of the business firms, as deviation in the respondents favouring higher product price is 23 per cent, the report predicted.

The increase in production, sales in the domestic and international markets, increase in product prices, and inflation positively affect employment, which is putting pressure for an increase in wages.

Most of the firms (56.5 per cent) reported that their employment situation did not change in the second half of 2007 from the first half of 2007; 33.9 per cent reported an increase in employment, while a decline was reported by 9.7 per cent of the respondents.

The positive net balance indicates that, overall, there was some increase in employment during the second half of 2007. The increase in net balance reveals that unemployment would decrease in future as the majority of the firms (59.7 per cent) are expecting no change in employment in the first half of 2008, 33.9 per cent are anticipating that workforce would increase, while 6.5 per cent are expecting a fall in their employment level for the next six months.

In the case of inflationary assessment, it seems that both the financial and the non-financial sectors have the same opinion. In the case of the non-financial sector, 96.8 per cent, 1.6 per cent, and 1.6 per cent of firms indicated higher, the same and lower level of inflation, as compared to the previous half of the Year 2007. In the case of the financial sector, 92.9 per cent respondents indicated higher inflation in the second half of the year 2007 than that is the first half of the year.

The business sector expects high inflation during the first six months of the year 2008. For the first half of the year 2008, 88.8 per cent of the firms anticipate an increase in the general price level, and 11.8 per cent expect the same level.

The financial sector expects a higher level of inflation during the first half of the Year 2008, as compared to the level of inflation prevailing during the second half of 2007. In the case of the non-financial sector, the percentage of firms expecting higher, the same and lower levels of inflation is 83.6, 14.8, and 1.6, respectively. The perception of the business sector about the pace of growth of the economy in the first six months of 2008 is rather pessimistic. The net balance remains negative as in the case of the previous assessment, as economic growth is expected to decline during the first half of 2008.

The financial sector, however, anticipates higher growth, whereas non-financial firms expect a lower level of growth. The analysis of expectations indicates the difference of forecasting about the level of growth during the remaining six months of the financial year