Indian consumer confidence shifts into higher gear in 2014-ZyFin Research

Sustained optimism on employment lifts ZyFin's Consumer Outlook Index out of last year's rut

ZyFin Research announced the Consumer Outlook Index (COI) for March 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 42.2 for March 2014; the COI has been consistently higher in 2014 than in any month of the previous year. 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 categorized 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 March 2014:

The ZyFin Consumer Outlook Index of India (COI) witnessed a mild decline of 0.4 points in March 2014 over the last month. This has been primarily due to a slight decrease in willingness to spend among Indian consumers. However, their broader economic outlook is gradually improving. The current score of 42.2 is also higher than the average for 2013 (40.6).

Among the COI components, the Employment Sentiment Index improved to 51.0 in March 2014, from 50.4 in the previous month; it has now been within optimistic territory for three consecutive months. This optimism is due to improving current and expected personal job security. At the regional level, the sentiment on employment was pessimistic (a score of less than 50) only in the East.

The Inflation Sentiment Index also improved, to 25.1, from 23.3 in the previous month. This is due, in large part, to growing comfort with food prices, as suggested by ZyFin's Food Prices Index, which is nearing optimistic territory (47.8) from deep pessimism only a year ago (23.5, March 2013). The chance of sustained improvement in inflation sentiment is, however, limited as prices of other goods and services remain sticky. Regionally, a consistently growing number of respondents in the West believe inflation would come under control over the next 12 months.

Despite these improvements, the Spending Sentiment Index declined for the third consecutive month. This is the key reason for the overall dip in the COI, as compared to the last month. At 29.0, the index is at its lowest level since February 2013. Consumers continue to voice their concerns over the slow rate of improvement in economic conditions, including employment and inflation. For spending and aggregate demand to bounce back, consumer confidence towards macro factors needs to strengthen at a steeper rate. The current improvement in sentiment on employment and inflation remain sluggish, not amounting to rising willingness to spend.

The Real Estate Sentiment Index inched up marginally, even as spending on other big-ticket items, such as vehicles and durables, weakened further. However, the scores reflects pessimism toward all large purchases. Among the regions, consumers in the South and East are most likely to spend on big-ticket items.

Giving his views on the ZyFin Consumer Outlook Index numbers for the month of March, Mr. Debopam Chaudhuri (VP Research, ZyFin Research) said, Although consumers are gradually becoming less pessimistic of overall economic prospects, at a personal level, they are not yet comfortable with planning major purchases. This translates into a delay in any recovery within the consumption sector, dominated by FMCG, auto and durables.

Powered by Capital Market - Live News