It wasn't just me who noticed that this Diwali was spark-less. Less houses displayed lights outside their balconies and those that did, displayed less lights than usual. Less fire-crackers were heard. I checked around with my colleagues, friends and extended family members across the country and got the same experience from everyone, without exception. This Diwali, bazaars were less crowded and the mood was less upbeat.
Newspapers reported that less gold was sold during this Dhanteras and that car sales were lower than expectations. So were the sales of consumer durables. This paper reported yesterday that "this season will probably go down as the toughest for fashion, durable and auto retailers/manufacturers, which log 30 per cent of annual sales this time of the year. The crucial Diwali week, which concluded on Sunday, saw some discretionary spending by consumers. But, sales were lower compared to last year."
The Economic Times reported that TV sales during this Diwali were up 10 per cent compared to the last Diwali. And that washing machine sales were up by 9 per cent, refrigerators by 10 per cent, air-conditioners by 8 per cent and microwave ovens by 9 per cent. This is a relief as sales were reported to be a washout during Onam and Durga puja.
Yet, one cannot miss the point that a barely-10 per cent growth during festival season can be a cause for celebration only in the light of very low expectations.
The BSE-CMIE-UMich consumer sentiments indices have been pointing to low consumer sentiments and expectations. Specifically, the indices have also been indicating that consumers are not very enthusiastic about purchases of durables around this time as they usually are.
During 2016, the proportion of households that said it was a good time to buy consumer durables was 9.7 per cent higher than those who said that it was a bad time. This is the average for the full calendar year. The range was a minimum of 3 per cent and a maximum of 17 per cent i.e. the proportion of households saying that this was a good time to buy consumer durables was at least 3 per cent higher than those saying it was a bad time.
During 2017, so far, on a net basis, the proportion of households that said it was a good time to buy durables was only 4.8 per cent – exactly half of what it was in 2016. And there were two weeks in 2017 when the number of households saying that this is a bad time to buy outnumbered those that said it was a good time.
Evidently, 2017 has been a bad year for consumer durables companies compared to at least 2016. And, the 2017 Diwali week was much worse. Households that believed that the Diwali week was a good week to buy consumer durables were only 0.7 per cent higher than those who believed it was not a good week to buy durables. In comparison, in 2016, households that were similarly upbeat were 10.8 per cent higher on a net basis.
In the three weeks ending in Diwali in 2016, on an average 12 per cent of the households were upbeat on a net basis. In the three weeks ending in Diwali of 2017, only 3 per cent of the households were upbeat on a net basis.
We don't see this relative pessimism in consumers coming to an end soon. Consumer expectations were at the lowest during the week ended October 22. The consumer expectations index fell to 87.9. This was 1.3 per cent lower than its level in the preceding week ended 15 October. The index for the week ended 15 October was the lowest till the latest week's data broke its record.
The index of consumer expectations is a combination of answers to three questions posed to households: Do you think your family income a year from now would be higher than this year, lower or the same; do you think that business conditions a year from now would be better, worse or the same compared to the current conditions; do you think over the next five years the country will rise continuously, fall continuously or will go up and down?
Between April 2016 and April 2017, households were generally more optimistic when answering these questions compared to questions relating to an assessment of their current economic conditions. However, from May 2017, expectations have turned distinctly negative. And, they are getting worse.
During eight of the last nine weeks, the index of consumer expectations was lower than the index of current economic conditions. During the last five weeks, the index of consumer expectations lost as much as 10.3 per cent. Something needs to break this negativity among households, soon.
Every Tuesday, Business Standard brings you CMIE’s Consumer Sentiments Index and Unemployment Rate, the only weekly estimates of such data. The sample size is bigger than that surveyed by the National Sample Survey Organisation. To read earlier reports on the weekly numbers, click on the dates:
November 21, November 28, December 4, December 11, December 18, December 25, January 1, January 8, January 15 , January 22, January 29, February 4 , February 12, February 19, February 27, March 5, March 13, March 19, March 26, April 02, April 10, April 17, April 23, May 1, May 8, May 15, May 21, May 28, June 4, June 11, June 18, June 25, July 2, July 10, July 16, July 23, July 30, August 7, August 14, August 21, August 27, September 3, September 10, September 17, September 24, October 1, October 8, October 15
Methodology
Consumer sentiment indices and unemployment rate are generated from CMIE's Consumer Pyramids survey machinery. The weekly estimates are based on a sample size of about 6,500 households and about 17,000 individuals who are more than 14 years of age. The sample changes every week but repeats after 16 weeks with a scheduled replenishment and enhancement every year. The overall sample size run over a wave of 16 weeks is 158,624 households. The sample design is of multi-stratrification to select primary sampling units and simple random selection of the ultimate sampling units, which are the households.
The Consumer Sentiment index is based on responses to five questions on the lines of the Surveys of Consumers conducted by University of Michigan in the US. The five questions seek a household's views on its well-being compared to a year earlier, its expectation of its well-being a year later, its view regarding the economic conditions in the coming one year, its view regarding the general trend of the economy over the next five years, and finally its view whether this is a good time to buy consumer durables.
The unemployment rate is computed on a current daily basis. A person is considered unemployed if she states that she is unemployed, is willing to work and is actively looking for a job. Labour force is the sum of all unemployed and employed persons above the age of 14 years. The unemployment rate is the ratio of the unemployed to the total labour force.
All estimations are made using Thomas Lumley's R package, survey. For full details on methodology, please visit CMIE India Unemployment data and CMIE India Consumer Sentiment.
The creation of these indices and their public dissemination is supported by BSE. University of Michigan is a partner in the creation of the consumer sentiment indices.
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
