Return on Sales and Profit Situation in the Manufacturing Industry

The development of the return on sales is an important indicator for the economic performance of an industry. As it represents the proportion of profit generated from sales, it is a key decision-making parameter for investors and credit institutions, especially when it comes to providing debt capital. The average return on sales of an industry also plays an important role for politics, e.g., for the allocation of subsidies. However, structural data from official statistics on the return of sales is available only after a considerable amount of time. For example, the annual cost structure survey in the German manufacturing industry is published by the German Federal Statistical Office one and a half years after the end of a reporting year. Due to this temporal lag, it is difficult to draw conclusions about the current economic situation. The ifo indicators on the return on sales and the profit situation close this gap by providing up-to-date information for the manufacturing industry. The ifo Business Survey in the manufacturing industry surveys the participating companies twice a year on this topic. The aggregated results of the qualitative question about the profit situation show the development of the earnings situation of an industry (Ebnet 2015). Moreover, the quantitative information provided by the question on return on sales allows for even more precise estimates.