Consumer Outlook Index for July 2014: Spend to rebound, says ZyFin Research

Updated: Aug 6 2014, 21:57pm hrs
ConsumerZyFin Research?s Consumer Outlook Index data for July 2014 indicates that consumer spending is bound for a gradual recovery. Reuters
ZyFin Researchs Consumer Outlook Index data for July 2014 indicates that consumer spending is bound for a gradual recovery. This is based on the steady improvement in consumers plans to make big-ticket purchases since April 2014, driven by a perceived improvement in economic conditions. Barring any rise in inflationary pressures, an uptick in actual sales of homes, vehicles and durables can, therefore, be expected over the next six months.

The Consumer Outlook Index, a barometer for consumer confidence, reflects current and future spending plans, employment and inflation outlook of urban Indian consumers. The index is based on a monthly survey of 4,000 consumers in 18 cities across India. It captures differences across cities and demographic consumer segments, which is important given the hugely heterogeneous urban Indian population. In July 2014, of the 18 cities surveyed, 11 showed improvement in consumer sentiment as compared to the previous month. Hyderabad, Mangalore, Mumbai and Guwahati registered the best overall scores for the month.

A distinct upward shift in consumers willingness to spend is seen since the run up to the NDAs win at the general elections and subsequent government formation. Current data reflects higher spending plans on durables and homes. Vehicle purchase sentiment is also on the mend. This should culminate into better sales volumes within the consumer sector in the upcoming festive period, a much-awaited deviation from weak sales trends observed over the past two festive seasons, says Debopam Chaudhuri, Chief Economist, ZyFin Research

Key Highlights of the ZyFin Consumer Outlook Index for July 2014:

The ZyFin Consumer Outlook Index of India (COI), at 44.2 in July 2014, is 0.1 points lower than in the previous month. Nevertheless, it is a vast improvement from the corresponding month of the previous year (40.8, July 2013), as has been the case since the electoral verdict in May 2014.

The COI comprises three major components, measuring consumer sentiment on spending, inflation and employment.

The Spending Sentiment Index assesses willingness to make big-ticket purchases over the next six months. The index increased to 33.4 in July 2014 from 30.4 in the previous month. The third consecutive increase brings the index to its highest level since November 2012. A larger number of consumers surveyed mentioned that they have plans to purchase homes and durables, as compared to previous months. Plans to spend on two- and four-wheelers have also seen a slight uptick. These improvements point to a recovery in consumer demand over the next six months.

The Inflation Sentiment Index is based on the largest inflationary expectations survey in the world. In July 2014, the index proved to be the dampener, dropping by close to three points, to 25.5, from 28.2 in June 2014.

The Employment Sentiment Index is a tracker of the employment situation as perceived by consumers. The index has maintained its optimistic streak (score above 50) throughout 2014. It registered a score of 52.5 in July 2014, as compared to 53.9 in the previous month.