New Delhi: Consumer sentiments declined for the first time since May with households less enthusiastic about buying consumer durables in November compared to the previous month, according to a survey by the Centre for Monitoring Indian Economy (CMIE).
This data from CMIE’s consumer pyramids household survey, along with a slump in some key high frequency indicators like two-wheeler sales and manufacturing purchasing managers index (PMI), indicates the challenges faced by policy makers to sustain demand beyond the festive season.
According to the survey, the Index of Consumer Sentiments fell from 52.5 in October to 51.8 in November.
“November 2020 saw a fall in employment and also a fall in household incomes. This double whammy has hurt consumer sentiments,” said Mahesh Vyas, MD and CEO of CMIE, in a note on their website Thursday.
Vyas pointed out that household well-being worsened in November compared to October.
“Households have suffered worsening health conditions as is reflected in resurgence in Covid-19 cases, a reversal of the rapid improvement in employment conditions seen till August 2020 and now, a fall in household incomes as well. In all three measures, trends that were improving gradually have reversed into deterioration,” he said.
In November, only 6.5 per cent of the people surveyed said it is a good time to buy consumer durables, as opposed to 7.4 per cent in October.
The Covid-19 pandemic and the subsequent economic lockdown that was imposed in March had seen demand plunge significantly.
In May, only 1.3 per cent of the people said it was a good time to buy consumer durable goods. However, since May, the purchasing sentiment saw a constant improvement before falling once again in November.
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Finance ministry hopeful of V-shaped recovery
Meanwhile, the finance ministry is hopeful of a V-shaped recovery despite a moderation in some economic indicators.
In its monthly economic outlook report for November, the ministry had pointed out that the news of the vaccine is adding to growing optimism but had warned that a surge in Covid-19 infections post the festival season was a downside risk.
However, it had also pointed out that some high frequency indicators like manufacturing PMI moderated in November compared to October. The index fell to 56.3 in November from 58.9 in October.
Many international financial institutions and rating agencies have also given less pessimistic forecasts about the contraction in the economy. Earlier this month, the Reserve Bank of India had also raised the country’s growth forecast to -7.5 per cent from -9.5 per cent for the year 2020-21.
According to the CMIE survey, households are also less confident about the future than before. In November, only 5.2 per cent of households expected that their income will be better next year as against 6.6 per cent in October.
Vyas said that the relapse in consumer sentiments shows that multiple factors are at play simultaneously.
“First, the fall in incomes (technically fall in proportion of households that report an increase in income) could have led to intentions to buy sliding back. Second, deteriorating perceptions about the future, as is seen in the data, could have nudged households to be conservative in current times,” he said.
Vyas added: “Third, the ramp-up in the intentions to buy till October could be a combination of release of pent-up demand and festive demand. Both are necessarily temporary. And so, when these are satiated, intentions to buy durables roll back to relatively modest levels.”
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