Consumer sentiment eased for the fourth consecutive month in December as respondents reported a significant weakening in their current financial situation.
The MNI India Consumer Indicator fell by 1.1% to 119.6 in December from 120.9 in November, the lowest in 15 months and not that far off theSeptember 2013 series low. Sentiment had picked up ahead of the general election in 2014, but has dropped back significantly, cautioning against the acute level of optimism associated with Prime MinisterNarendra Modi.
Out of the five components that contribute to the MNI India CSI, only the Business Conditions in a Year Indicator improved this month. The December survey, however, highlighted a growing divergence between consumers' deteriorating assessment of their own finances and their more optimistic views on the outlook for the economy.
The drop in sentiment was led by the Durable Buying Conditions Indicator with pessimists outnumbering optimists for the first time in the survey's history following the conclusion of the festival season. The decline came in spite of the low level of inflation, with respondents reporting they were more satisfied with the current level of prices. Consumers were seemingly more concerned about the current state of their household finances which fell to the lowest in 17 months.
There was more negative news for car producers. Almost 35% of consumers believed it would be a bad time to purchase a car in the next 12 months, the highest in the survey's history. Consequently, the Car Purchase Expectations component fell to a record low of 79.7 in December with a growing proportion of respondents associating cars with low investment value. The government's decision to discontinue the excise tax concessions on the automobile sector, which had been in place since February, will further undermine car buying sentiment.
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, "This was a very disappointing end to the year with consumer confidence falling for the fourth consecutive month. Coming on the back of other mixed economic data, the authorities need to be increasingly vigilant to the risk of the recovery stalling.
"The recent positive news on inflation opens the door for the Reserve Bank of India to ease off the monetary brakes and cut interest rates in the next few months. This would help to underpin consumption and support growth in the economy over 2015."
www.mni-indicators.com
