Slowdown is taking hold: Consumer sentiment plunges, RBI survey flags low confidence in economy

The Indian consumer has spoken, and it makes for grim reading.

RBI's consumer confidence survey, released yesterday, shows how rapidly consumer confidence is slipping as worries over jobs and other aspects of the economy take firm hold.

For the moment there seems to be no stopping the continuous fall in consumer confidence in the economy. For the month of July, public sentiment was deeply in the negative on three of the five key gauges of consumer confidence.


What is worse, the survey predicts confidence to fall even further — a marked change in the situation compared to a mere two months ago.

The current situation index dived to 95.7 in July, a steep fall from 97.3 a month earlier and an even steeper fall from 104.6 in March.

The future expectations index, on the other hand, came down to 124.8 in July, a significant four-point fall from the previous month.

The RBI survey for July was carried out in 13 major cities — Ahmedabad, Bengaluru, Bhopal, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai, Patna and Thiruvananthapuram.

The survey collected consumer responses on households’ perceptions about and expectations from the general state of the economy — parameters such as the general jobs scenario, the overall price situation and consumers' own income/spending.

It found that the average Indian consumer's perceptions of the general economic scene and the jobs situation has noticeably gone south. Consumers' assessment of their own incomes was also found to be less optimistic compared to two months earlier.

During the month, buyers turned less bullish on discretionary spending — a sign that possibly reflects the ongoing slowdown in demand for consumer durables, cars and the like.

The RBI survey comes amid an entrenched slowdown in consumption as the country's households either delay purchases or go bargain hunting at a time when the economy continues to crawl.

Tepid consumer sentiment has also seeped into the country's over business sentiment, the survey showed. Respondents from the business domain were less cheery about order book and capacity utilisation during the second quarter of the financial year.

Survey responses revealed that fewer ordered were received, compounding the combined blow of falling sales and rising costs of raw materials.

Businesses, however, were a tad upbeat about the second quarter: they expect that the availability of funds and profit margins will take a turn for the better after a while.