Indian consumer confidence dipped in August: Report

This decline is primarily due to weakening in sentiment toward job security and willingness to spend on big-ticket items.

The author has posted comments on this article M Allirajan, TNN | Sep 9, 2014, 04.32PM IST

COIMBATORE: Consumer confidence has waned marginally for the second consecutive month in August, according to ZyFin Research's Consumer Outlook Index data.

"Although it is too early to term this a trend, it does signal that the euphoria prompted by the formation of the new government is starting to weaken as consumers sense no major shift in economic conditions," ZyFin said.

This decline is primarily due to weakening in sentiment toward job security and willingness to spend on big-ticket items, it said. The ZyFin Consumer Outlook Index of India (COI), at 43.6, is 0.6 points lower than in the previous month. The COI is a barometer for consumer confidence. It reflects current and future spending plans and employment and inflation outlook of urban Indian consumers.

"The sudden dip in confidence levels illustrates the short attention span of Indian consumers," said Debopam Chaudhuri, chief economist, ZyFin Research.

"It is crucial for confidence to be restored through effective expectations management, especially by the government," he said. While economic recovery is a long-drawn process, and results cannot be expected overnight, low consumer confidence can overturn all positive measures taken so far, Chaudhuri said.

Though the score remains higher than that in any of the 12 months of 2013, a decline at this stage of the economy's healing process could catalyze a setback, with consumer spending, a major contributor to India's growth story, ZyFin stated.

The number of consumers willing to purchase homes and home appliances declined in August compared to July. However, willingness to spend on two and four-wheelers did not witness any major movement, with the scores remaining flat. "We do not expect this negative sentiment to impact festive spending in 2014 as this is a forward-looking indicator," ZyFin said.

The employment index remains above the benchmark level of 50, suggesting consumers are still optimistic. The current score is 50.9, down from 52.5 in the previous month. "Consumers show greater concern toward their own job security, rather than the overall unemployment level in the economy."

"This lack of confidence has had an impact on their willingness to spend," ZyFin stated. The inflation sentiment index, which is based on the inflationary expectations survey, improved by 1.2 points to 26.7, in August.