Household optimism on economic conditions for coming year takes a hit

Sentiments about current employment conditions & own income deteriorate

Households in major cities in India seem to be less optimistic about the economic conditions for the year ahead.

The lower optimism on general economic situation, employment and prices led to 4.1 point moderation in the future expectations index (FEI) to 120.7 in July 2024 from 124.8 in May 2024, according to Reserve Bank of India’s Consumer Confidence Survey.

Sentiments on current employment situation and own income deteriorated for the second consecutive survey round. The outlook for both these parameters moderated within the zone of optimism.

The survey collected current perceptions and one-year-ahead expectations of households on the general economic situation, employment scenario, overall price situation, own income, and spending across 19 major cities. RBI’s latest round of the survey was conducted during July 2-11, 2024, covering 6,062 respondents. Female respondents accounted for 54.4 per cent of this sample, RBI said in a statement.

Consumer confidence for the current period declined for the second consecutive survey round after a prolonged rising trend in the post-Covid period. Their sentiments on major parameters, except spending, moderated and, as a result, the current situation index (CSI) declined to 93.9 in July 2024 from 97.1 two months earlier, RBI survey added.

RBI’s Household Inflation Expectations Survey indicated a larger share of households expects higher general prices and inflation as compared to the May 2024 survey round. Marginally higher price and inflationary pressures were reported across major product groups.

For one year ahead, inflation expectations were closely aligned to food prices, housing and cost of services, the survey added.