Consumer durables demand clutching at straws

Consumer sentiments shot up by an impressive 5.5 per cent during the week ended September 17. This is an unusually high increase of the consumer sentiments index during a week.
 

The pitrupaksh period did not dampen spirits in 2017, like it did not in 2016.

The proportion of households that said that this was a good time (compared to other times) to buy consumer durables increased to 26.2 per cent. This is higher than in any of the preceding four weeks. The past four weeks' average was 24 per cent. The proportion of households that said that this was a bad time (compared to other times) to buy consumer durables was 21.9 per cent which was a shade lower than the average 22.2 per cent proportion in the past four weeks.

On a net basis, 4.2 per cent households said that this is a good time to buy consumer durables. This is the highest ratio in the past four weeks.

If producers, retailers and marketing professionals of consumer durables have been led to believe that pitrupaksh is not the period to push sales, its time they revisited this theory. On the aggregate, the Indian consumer's decision to buy consumer durables does not seem to care much about pitrupaksh.

If there is a pitrupaksh effect then it is likely a self-fulfilling prophesy created by the supply chain. It is possible that stockists are more superstitious than consumers. It is also possible that if the supply chain tries hard to capitalise on auspicious days it is correspondingly compelled to accept the incrimination of inauspicious days.

India has progressed and maybe, it is time for consumer durables companies to see some change in their strategies.

Thanks to greater mobility of Indians, festivals are becoming a pan-India phenomenon. Mumbai will celebrate Navratri and Pujo beginning next week with as much fervor as it did Ganesh Chaturthi. Later, it will also celebrate Chhat Puja. Poor Biharis being beaten up in Mumbai was an unfortunate (and deplorable) short-term collateral damage of a relentless change that is underway. Festivals are not rooted much in tradition any more. They are the outcome of a search for celebrations, which can locate a sanction in our traditions and our culture.

Given that migration has engineered a pan-India celebration of all kinds of festivals, and given that consumers don't pay much attention to pitrupaksh, the consumer goods companies could do better to consider the entire period from Ganesh Chathurthi in August-September through Makar Sankranti or Akshay Tritiya in February-March to be a festive season, without interruption.

It is worth noting that both, rural and urban regions ignored pitrupaksh as consumer sentiments improved in both regions. The urban consumer sentiments index rose 2.8 per cent while the rural index rose by 6.7 per cent.

Yet, both have very different views with respect to buying of consumer durables, now. And the views are in stark contrast to their overall sentiment.

Rural folks displayed a robust, 6.7 per cent increase in household consumer sentiments during the week ended September 17. But, they showed no net improvement in their inclination to buy consumer durables. While the number of rural respondents who believed that this was a good time to buy consumer durables increased from 19.5 per cent to 21.4 per cent, the proportion of rural households that believed that this was a bad time increased from 21.1 per cent to 25.2 per cent. Rural India has been giving consumer durables a thumbs-down similarly since early August.

However, most of the demand for consumer durables is in urban India. And here the story is somewhat promising, but only a bit.

During the week ended September 17, 28.6 per cent of urban households said that this was a good time to buy consumer durables. This is a recovery from a persistent fall since late July; and it is closer to the average.

The proportion of respondents who said that this is a bad time to buy consumer durables dropped quite sharply from 23 per cent to 20.3 per cent. Yet, it was high compared to the average of 18 per cent.

While the proportion of urban households who think it is a good time to buy durables has been steady, the proportion who believe it is a bad time has been increasing.

The BSE-CMIE-UMich consumer sentiments indices seem to suggest that the demand for consumer durables in the coming festivals season is not at its best but, it did improve in the last couple of weeks, even if just a wee bit.

 

Every Tuesday, Business Standard brings you CMIE’s Consumer Sentiments Index and Unemployment Rate, the only weekly estimates of such data. The sample size is bigger than that surveyed by the National Sample Survey Organisation. To read earlier reports on the weekly numbers, click on the dates:

November 21, November 28, December 4, December 11, December 18, December 25, January 1, January 8, January 15 , January 22, January 29, February 4 , February 12, February 19, February 27, March 5, March 13, March 19, March 26, April 02, April 10, April 17, April 23, May 1, May 8, May 15, May 21, May 28, June 4, June 11, June 18, June 25, July 2, July 10, July 16, July 23, July 30, August 7, August 14, August 21, August 27, September 3, September 10

Methodology

Consumer sentiment indices and unemployment rate are generated from CMIE's Consumer Pyramids survey machinery. The weekly estimates are based on a sample size of about 6,500 households and about 17,000 individuals who are more than 14 years of age. The sample changes every week but repeats after 16 weeks with a scheduled replenishment and enhancement every year. The overall sample size run over a wave of 16 weeks is 158,624 households. The sample design is of multi-stratrification to select primary sampling units and simple random selection of the ultimate sampling units, which are the households.

The Consumer Sentiment index is based on responses to five questions on the lines of the Surveys of Consumers conducted by University of Michigan in the US. The five questions seek a household's views on its well-being compared to a year earlier, its expectation of its well-being a year later, its view regarding the economic conditions in the coming one year, its view regarding the general trend of the economy over the next five years, and finally its view whether this is a good time to buy consumer durables.

The unemployment rate is computed on a current daily basis. A person is considered unemployed if she states that she is unemployed, is willing to work and is actively looking for a job. Labour force is the sum of all unemployed and employed persons above the age of 14 years. The unemployment rate is the ratio of the unemployed to the total labour force.

All estimations are made using Thomas Lumley's R package, survey. For full details on methodology, please visit CMIE India Unemployment data and CMIE India Consumer Sentiment.

The creation of these indices and their public dissemination is supported by BSE. University of Michigan is a partner in the creation of the consumer sentiment indices.