Sample

A sample of around 2000 firms has been taken from large firms registered with Securities & Exchange Commission of Pakistan (SECP) to survey around 500 firms each month. These firms are selected with highest paid up capital within selected economic activities. The industry sample covers around 22 different manufacturing activities and construction sector according to their approximate value added as per latest Census of Manufacturing Industries (CMI). On the other hand, the services sector sample includes large firms working in retail and wholesale trade, health care, education, hotel and restaurants, transportation, consultancy, telecommunication and financial services.

Business Confidence Survey (BCS)-Index Construction


1. Computation of the Diffusion Index

The results of Business Confidence Survey (BCS) are reported in the form of Diffusion Index (DI). The Diffusion Index shows the general tendency of respondents about a certain aspect of a particular survey. The questionnaire for this survey offers following five types of options to the respondents for their views on each question.

Sr. No.	Answer Options	Assigned score
1	PP = Very positive	1
2	P = Positive	0.5
3	E = Unchanged/neutral	0
4	N = Negative	-0.5
5	NN = Very negative	-1

On the basis of these five options, the Diffusion Index is computed in the following two steps:

Step 1: Net Response (NR) is computed as below:

NR = {(1.00 * PP) + (0.05 * p) + (-0.50 * N) + (-1.00 * NN)}

Step 2: The diffusion index is computed as follows:

DI = (NR + 100)/2

2. How to interpret the index?

The diffusion index ranges from the minimum value of 0 to the maximum value of 100 i.e. a value of 50 is indicative of neutrality, 0 no confidence and 100 indicates extreme confidence. So in general:

• DI > 50 indicates that Positive views are more than Negative views;
• DI = 50 indicates that Positive views and Negative views are equal;
• DI < 50 indicates that Positive views are less than the Negative views

We report diffusion index for each question; the composite indices such as Current Business Confidence Index (CBCI), Expected Business Confidence Index (EBCI), Business Confidence Index (BCI) and Purchasing Managers Index (PMI) are averages of selected questions. In addition, overall economy wide indices are computed by taking weighted average of industry and services sector indices. The weight assigned to each sector is based on its share in the Non-Agricultural GDP.

3. Questions used for different Indices

Diffusion Index	Question description
Current Business Confidence Index	- The general economic conditions in the country over the past six months have
	- Excluding normal seasonal changes, your production over the past six months has
	- Excluding normal seasonal changes, the total number of employees at your firm over the past six months has
Expected Business Confidence Index	- You expect the general economic conditions in the country in the next six months to
	- Excluding normal seasonal changes, you expect your production in the next six months to
	- Excluding normal seasonal changes, you expect the total number of employees at your firm in the next six months to
Business Confidence Index	- Averages of current and businesses confidence indices
Purchasing Manager Index (for industry only)	- Excluding normal seasonal changes, your production over the past six months has
	- Excluding normal seasonal changes, the total number of employees at your firm over the past six months has
	- Excluding normal seasonal changes, your total order books over the past six months have
	- In the past six months, the quantity of raw material purchases has
	- Average supplier delivery times over the past six months has
Qualitative Inflation Expectations Index	- You expect the overall inflation rate in the next twelve months to