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Consumer confidence fell in May following two consecutive months of growth, led by less optimistic expectations for future business conditions.
The MNI India Consumer Sentiment Indicator fell 1.5% to 111.7 in May from 113.4 in April. Sentiment was down 6.6% compared with the same month a year ago, and 8.6% below May 2014, when Narendra Modi became Prime Minister. Evidence from the survey suggests that consumer sentiment has failed to benefit from the change in the government, with sentiment towards personal finances, business conditions, housing and employment weakening over the past two years.
This month’s fall in confidence was mainly driven by weaker expectations about future business conditions. Business Conditions in One Year fell 2.9% on the month while that for five years fell 6.9%. Consumers were more downbeat about the current business environment, which also influenced their outlook for employment.
Sentiment towards household finances has bounced back since February when it fell into contraction. In spite of an improvement in May, consumers were less willing to spend money on shopping, entertainment and dining out. Sentiment Indicators declined further below the 100 neutral level, reflecting the impact of hike in the service charge.
There was bad news for the automobile industry as consumers revised down their expectations for car purchases over the coming year. The Car Purchase Expectations Indicator fell into contraction for the first time in nine months.
Inflation expectations picked up in May, while dissatisfaction towards the general level of prices rose to a record high in May.
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, “While official data on economic growth shows GDP growth strengthening over the past two years, this certainly hasn’t been reflected on the ground among consumers in India. The MNI India Consumer Sentiment Indicator is down 6.6% on the year with consumers unconvinced by talk of economic revival. Measures of spending remain depressed while a renewed pick-up in inflation expectations will limit the ability of the RBI to further cut interest rates.”
