Consumer confidence plummets to all-time low in July: RBI Survey

The data was compiled on the basis of the central bank’s consumer confidence survey.

Consumer confidence fell in July 2020 to record levels as the Reserve Bank of India’s (RBI) current situation index (CSI) recorded its all-time low.

However, the future expectations index (FEI) charted back into the positive territory, indicating signs of recovery for the year ahead.

The data was compiled on the basis of the central bank’s consumer confidence survey. In view of the Covid-19 pandemic, the survey was conducted through telephonic interviews during July 1-12, 2020 in 13 major cities — Ahmedabad, Bengaluru, Bhopal, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai, Patna and Thiruvananthapuram.

Perceptions and expectations on the general economic situation, employment scenario, overall price situation and own income and spending were obtained from 5,342 households across these cities.

Consumer perception of the prevailing economic situation, employment scenario and own income was significantly lower than that in May 2020.

At the same time, respondents were somewhat optimistic about these parameters for the coming year vis-a-vis the previous survey round.

“Most respondents reported reduction in discretionary spending though their overall spending increased during the last one year; they do not expect to increase non-essential spending in the coming year as well,” the RBI said.

While consumption has improved from the initial months of the lockdown, analysts have pointed out that consumer sentiment is not very upbeat and households are preferring to save money.

A recent report by the economic research wing of the State Bank of India (SBI) pointed out that people are increasing their savings even at a time of negative real interest rates as they are exercising precaution.

An uncertain outlook on employment has also depressed consumption.

In a recent report, Centrum Broking said, “Covid-19 has led to pay-cuts/layoffs for consumers leading to reduction in discretionary spending resulting in a consumption demand hit.” The unemployment level increased to 23.5% in May from an average 7.5% over May 2019-February 2020, while the labour participation rate declined to 38.2% from an average of 43%, the report said.