Personal Finances Drag Down India Consumer Sentiment - MNI India Consumer Sentiment Indicator Lowest Since March

The MNI India Consumer Sentiment Indicator fell for the third consecutive month to 118.6 in July from 119.5 in June led by a weakening in personal finances.
 
Consumer confidence was down by 4.5% on the year and all five components of the Consumer Indicator were below their outturns a year earlier. The trend decline in sentiment seen since early 2014 had levelled off in recent months but the July outturn showed renewed weakness.
 
The decline in July was led by the Current Personal Finances Indicator which fell for the third consecutive month to hit a record low. Households were also slightly less optimistic about their future finances. Respondents said that higher family expenses were the main reason for their concern. As a result, consumers were left with much less to save, with 45% of respondents not saving at all, higher than last month’s 33%.
 
Since the start of the year, optimism on current business conditions has fallen. This is in line with our sister MNI Business Sentiment Survey which shows that business sentiment remains lacklustre. Expectations for future Business Conditions have been more resilient as respondents are still optimistic that there will be bold reforms, with the short-term measure up by 1.3% and the long-term measure roughly around the same level as in January.
 
Weaker overall sentiment was probably down in part to higher inflation. The Inflation Expectations Indicator has risen 10.8% since the start of the year and was 2.5% above the outturn of July 2014. The indicator has a good lead on CPI inflation which is likely to turn upwards over the coming months, not least due to the impact of uneven monsoon rains on food prices.
 
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, “This was a very disappointing result with consumer sentiment the weakest since March and not that far from the record low set in 2013. So far the rate cuts have had little impact, with consumers the most concerned about their finances since the survey began.”
 
“Higher inflation over the second half of the year may preclude further action on rates from the RBI with the central bank likely to hold policy steady in August.”

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