Indian consumer confidence improves for 4th consecutive month- ZyFin Research

Anticipated recovery in economic conditions stimulates increase in ZyFin's Consumer Outlook Index

ZyFin Research has announced the Consumer Outlook Index for February 2014. The index, which is a barometer of consumer confidence, reflects current and future spending plans, employment and inflation outlook of urban Indian consumers. It has registered a score of 42.6, an uptick of 0.5 points over the previous month. A score above 50 reflects optimism while below 50 is an indication of pessimism. The cities of Mangalore, Bengaluru, Mumbai and Hyderabad registered the best overall scores for the month.

The index is based on a monthly survey of 4,000 consumers across 18 cities categorised into metros, Tier I and Tier II. With private spending accounting for over 55% of India's real GDP, consumer outlook plays an important role in identifying turning points ahead of time.

Key Highlights of the ZyFin Consumer Outlook Index for February 2014

The ZyFin Consumer Outlook Index of India grew by 0.5 points in February 2014 over the last month. At 42.6, the index is at its highest since December 2012.

The overall Economic Sentiment Index improved by 1.9 points to 59.3, as compared to the previous month. Consumers are gradually regaining confidence in overall economic conditions. All 18 cities surveyed contributed to this rise, with Tier 2 cities reporting the biggest improvement in sentiment.

The Employment Sentiment Index remains in optimistic territory, with a score of 50.4. This optimism is due to improving personal job security, which is reflected across the tiers. Tier I cities are most optimistic, at 51.8, with Tier II cities and metros nearing optimism, at 49.7 and 49.4, respectively.

The Inflation Sentiment Index remains flat at 23.3, still reflecting strong pessimism. However, we expect this index to improve as consumers are gradually growing comfortable with food prices as measured by the survey. A relatively large number of consumers in metro cities believe that inflation is under control, with a score of 25.6; Tier I and Tier II cities are lagging behind at 21.9 and 20.7, respectively.

The Spending Sentiment Index remains low. Growing optimism about economic conditions has yet to translate to greater spending, as consumers remain highly cautious. They still feel lending rates are high and will rise further. The index declined by 2.4 points to 29.6, its lowest since March 2013. The February survey reflected a decline in spending plans on durables, vehicles as well as homes. The sentiment was highest in Tier II cities, at 34.1, while metro and Tier I cities declined, to 33.2 and 21.9, respectively.

Although overall spending plans remain subdued, interesting differences in opinions were observed within the granular responses. For the first time, the Real Estate Purchase Sentiment Index was highest in Tier II cities, at 33.1; sentiment in metro cities dropped for the eighth consecutive month, to 33.

Consumer outlook in Hyderabad, which was uncharacteristically pessimistic over the five previous months, returned to past levels, seemingly driven by clarity on its political future. Several key indices are now at their six-month high.

Giving his views on the ZyFin Consumer Outlook Index numbers for the month of February, Mr. Debopam Chaudhuri (VP Research, ZyFin Research) said, It is encouraging to note that consumer confidence on employment and overall economic prospects is improving. This improvement should catalyse spending in the near future. The ZyFin Business Cycle Indicator has been indicating moderate expansion in industrial activity since January and would gather momentum with rising private spending.

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