Companies more confident than consumers: Survey

While confidence about the economy among companies has already climbed to pre-crisis levels, consumer confidence is yet to bounce back, according to a survey conducted by MasterCard Worldwide and the National Council for Applied Economic Research (NCAER).

The business confidence index (BCI) for Indian companies has bounced back to 156.8 points in the April-June quarter of 2010 after falling to a low of 81.6 during the same period last year.

It was at 154 during the March quarter of 2008, before the Indian economy was hit by the economic downturn.

In contrast, the consumer confidence index (CCI) climbed to 68.8 during the first half of 2010 from a low of 63.9 in the second half of 2008. The index had reached 82.1, on a scale of 1 to 100, during the first half of 2008.

Among cities, consumers in Chennai were four times as optimistic about prevailing economic conditions than consumers in Delhi, according to the survey.

In fact, New Delhi, which had a CCI score of 22.3, was the only city in which consumers were pessimistic about the economy. A score above 50 indicates optimism, while a score below 50 reflects pessimism.

Consumers in Chennai were the most optimistic about the economy, scoring 96.8, while Mumbai and Bangalore scored 77.9 and 68, respectively.

Across cities, consumers below 30 years of age were the most confident while those above 45 were the least confident.

Dining and entertainment emerged as the highest purchasing priority among consumers, with 67 per cent of respondents listing it as a priority. Spending on fashion and accessories was the next highest priority for consumers.

BCI is at its highest level since 2007 and has been climbing for four successive quarters. Companies were most confident about the overall economic climate and their own financial positions. However, the investment climate and capacity utilisation indicators both registered a decrease.

While BCI has been rising, the political confidence index (PCI) continued to slide, falling 16.48 points to 105.7.

“The contra-movement of BCI and PCI at the aggregate level reflects an assessment that while the overall economics scenario is improving, the perception of a positive policy environment is less widely shared,” said Yuwa Hendrick-Wong, Economic Advisor, MasterCard.

“This indicates that there is a de-coupling between political confidence and business confidence. It shows that businesses are confident about their prospects even though there is uncertainty about the political climate,” he added.