The Basque business confidence index shows rising pessimism about Q1 2020

These results were taken from the Laboral Kutxa Business Confidence survey conducted among 400 companies in the Autonomous Community, in order to gauge their expectations for the first quarter of 2020.

The credit union has indicated that the results “worsened significantly” with respect to the previous quarter and the Confidence Index is at 46.2, which implies a significant drop with respect to the previous quarter (52).

The interpretation is that companies have a more pessimistic view of the evolution of the economy in the first quarter of 2020. The value of the index below 50 implies being in a contraction zone, which is consistent with the values obtained for other geographical areas such as Spain (46.8 data for October), or the Euro Zone itself (45.9).

The survey noted that 54.2% of companies believe that the economic environment will be maintained, 4.6% think that it will improve, so a less optimistic view prevails than in the previous quarter.

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Billing period of the first quarter of 2020

Most companies forecast lower turnovers over the course of Quarter 1 of 2020. The responses are divided between those who believe that it will be maintained (52.4%), and those who believe it will improve (22%), with 25.6% being the proportion of companies that expect their turnover to be worse.

In the survey relating to the fourth quarter of 2019, that percentage of unfavorable opinion was 17.4%, so it has risen by more than eight percentage points, while those that believe they will improve their turnover dropped by eleven points.

57.2% believe that activity will be maintained in the first quarter, compared to 10.4% who expect it to improve. However,  32.4% believe that activity will worsen, a figure that is significantly higher than in the previous quarter.

Most companies are also predicting a drop in the number of orders. 54.9% of those surveyed expect the volume to be maintained and 19% to improve, compared to 26.1% who think it will be lower.

This pessimistic attitude is also evident in predictions about prices, with 74.4% of those surveyed believing that they will be maintained throughout the first quarter. Of the remaining companies, 9.4% think that prices will be higher and the remaining 16.2% are inclined towards lower prices.

In relation to the expectations of profitability of operations, 64.3% believe that it will remain the same, while 12.9% of companies believe that it will be higher and 22.8% expect lower returns.

In the chapter on investment, the survey indicates that the data provides a more negative picture than in the previous quarter, and it seems that companies do not intend to maintain their productive capacity and ultimately increase the number of employees.

Specifically, 67.1% of the companies believe that the investment volume will be maintained during the first quarter of 2020 and 14.4% believe that it will increase. Therefore, 18.5% of the respondents think that it will decrease.

On the other hand, 78.7% of companies consider that employment will be maintained, as opposed to 10.9% whose expectations include an increase in the workforce, and 10.4% just the opposite.

The rising pessimism amongst Basque and European businesses comes amid a turbulent background. There are deep concerns about a potential trade war between the United States and EU and rising tensions in the Middle East. Should the situation begin to worsen we should expect businesses concerns to grow over the course of 2020.

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(Featured image by William Iven via Unsplash)

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