High vegetable, grocery, and energy prices have disrupted the budget of most Indian households. Besides, unaffordable housing costs (rentals & EMI) and education & healthcare costs have impacted many middle-class households. An analysis of 1QFY24 results of the consumer companies indicates that there was nothing particularly noteworthy in the overall performance of the consumer companies. Demand environment for both staples and durable consumer goods remained subdued; though some companies reported decent growth in margins primarily due to lower costs.
The current quarter (2QFY24) has witnessed disruptions due to challenging weather conditions. The southwest monsoon has been erratic both temporally and spatially. To date only about 43% of districts have received normal rainfall; whereas 40% of districts are deficient and 17% have received excess or large excess rainfall. Northern states have witnessed significant disruptions due to excess rains; impacting the logistics and crops. Besides, the festival season this year is pushed back by one month, pushing the festival demand to 3QFY24. Obviously, the outlook for consumer demand does not look exciting for the current quarter.
In this background, it is interesting to note the findings of the latest (July 2023) Consumer Confidence Survey (CCS) by the Reserve Bank of India (RBI). The key highlights of the survey are:
Present tense: After persistent recovery for almost two years, consumer confidence for the current period stood a shade lower than that witnessed in the previous survey round; improvement in respondents’ sentiment on income and spending was offset by somewhat higher pessimism on the general economic and employment situation.
Future hopeful: Going forward, households expect improvement in general economic, employment, and income conditions; they turned less pessimistic on one year ahead price situation vis-à-vis May 2023 round of the survey. The future expectation index (FEI) remained in optimistic terrain and recorded a marginal rise in the latest survey round.
Sentiments improving: Sentiments on current income improved further and moved to an optimistic zone for the first time in four years; future earnings expectations remain buoyant.
The current perception of the economic situation, employment, and inflation has worsened recently. It has persistently remained negative since July 2022.
The expectation for one year ahead regarding economic situation, employment, and spending has also worsened as compared to May 2023 survey. Though it still remains in positive territory, it has not shown any material improvement since July 2022.
It is fair to say that the future expectations of improvement are driven more by hopes rather than any substantive basis.
