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RBI: Consumer confidence at all-time low in Sept, set to improve in next 12 months

The consumer confidence index declined to 49.9 in September, as against 53.8 in July.

By: ENS Economic Bureau | Mumbai |
October 11, 2020 12:19:11 am
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Consumer confidence remained at an all-time low level in September with the general economic situation worsening during the month, according to a survey by the Reserve Bank of India. However, the situation is set to improve in the next 12 months, the survey said.

The consumer confidence index declined to 49.9 in September, as against 53.8 in July. However, the index has improved from 105.4 to 115.9 on a one-year ahead expectations basis, indicating a recovery in the consumer confidence level over the next 12 months.

According to the RBI’s consumer confidence survey, the current situation index (CSI) recorded its third successive all-time low, as the respondents perceived further worsening in general economic situation and employment scenario during the last one year. Households were, however, more confident for the year ahead: The future expectations index (FEI) improved for the second successive survey round, the survey said.

The survey was conducted during August 29 –September 10, 2020 in 13 major cities. Perceptions and expectations on general economic situation, employment scenario, overall price situation and own income and spending were obtained from 5,364 households across these cities, it said.

“More respondents reported curtailment in both overall and essential spending during the past one year, when compared with the last survey round. Consumers expect improvements in general economic situation, employment conditions and income scenario during the coming year,” it said. Discretionary spending, however, is expected to remain low in the near future, the RBI survey said.

On the inflation outlook, another RBI survey said households’ median inflation expectations remained elevated for both three months and one year ahead periods. Their perception of current inflation and expectation for inflation over the next three months were, however, a shade lower than that in the previous round of the survey. More households expect general inflation to increase over the three months and one-year ahead periods, but the share of respondents expecting higher food inflation over the next quarter declined in comparison with that in July 2020.

The RBI’s survey on the manufacturing sector says expectations for the third quarter of 2020-21 show further improvements in production, capacity utilisation and order books. “Going forward, respondents polled some recovery in external demand situation and job landscape. Overall financial situation and availability of finance portrayed optimism,” the survey said.

Meanwhile, manufacturing companies assessed upturn in production, capacity utilisation and order books during the second quarter of 2020-21 from the unprecedented contraction in the previous quarter. Respondents indicated frail sentiments on employment and external demand conditions. “Overall financial situation was assessed to have improved. Respondents maintained negative sentiments on selling prices and profit margins in Q2 of 2020-21, though pessimism moderated,” it said.

According to another survey on the economic growth, real gross domestic product (GDP) is likely to contract by 9.1 per cent in 2020- 21 but it is expected to recover next year, when it is expected to grow by 8.2 per cent.

“Real private final consumption expenditure (PFCE) is assessed to contract by 11.0 per cent during 2020-21, followed by an expansion of 8.5 per cent in the next year. Real gross fixed capital formation (GFCF) is projected to record a large decline of 21.0 per cent in 2020-21. It is expected to grow by 10.0 per cent in 2021-22, the RBI survey said.

The survey said forecasters have assigned highest probability to real GDP growth lying below (-) 9.0 per cent in 2020-21. For 2021-22, highest probability has been assigned to GDP growth lying in the wide range of 7.0-8.4 per cent.

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