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The MNI India Consumer Sentiment Indicator fell 3.2% to 115.3 in September from 119.1 in August, the lowest level since the survey began in November 2012.
While the indicator remains above the 100 level which separates optimists from pessimists, it has been gradually trending down since last year suggesting that demand continues to remain sluggish. Lacklustre domestic demand was cited by the RBI as part of the rationale for its 50 basis point interest rate cut at the September monetary policy meeting and our survey supports this assessment.
While the sharp rise in domestic stock prices since the start of 2014 is testament to the growing confidence investors have in India’s economic prospects, it is not a view shared by our panel of urban consumers. Respondents were the least optimistic about their household finances, with both current and future measures of Personal Finances falling to record lows.
Ahead of the key festival season, consumers were a little more optimistic about purchasing big-ticket items. Still the Durable Buying Conditions Indicator was lower than would normally be expected given the time of year, averaging 109.7 in the three months to September, five points below its respective outturn a year ago.
Respondents revised down their expectations for business conditions sharply and were more downbeat in their perception of the current business situation as a result of the weaker global environment. Expectations for Business Conditions in One Year fell to 115.5, the lowest level since September 2013 when India was in the throes of a currency crisis.
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, “Most observers tend to agree that the long-term outlook for India is positive, with equity markets having taken their cues from a wave of Modi optimism. Seen through the eyes of our survey respondents, though, the short- to medium-term outlook looks less compelling, with consumer confidence at a record low and little sign of a quick turnaround.”
“So far the rate cuts have had little impact, with consumers particularly concerned about their finances. The recent cut in the policy rate by the RBI should help, although for now our survey suggests that household spending will remain capped.”
