Consumer Outlook Grows Considerably over 2014: ZyFin Research

Perceptions on inflation, employment and spending much stronger than 12 months prior; Outlook of urban Indians stronger in smaller cities

ZyFin Research's Consumer Outlook Index improved to 47.4 in December 2014, a strong improvement from its score of 40.2 in the same month of the previous year. This indicates that consumers believe that the economy is on an uptrend. The current score has been elevated by improving consumer sentiment toward big-ticket purchases, coupled with a more favourable view on inflation. These changes, a precursor to actual spending, are essential for economic growth to find its way back to sustainable levels.

The Consumer Outlook Index, a barometer for consumer confidence, reflects current and future spending plans, employment and inflation outlook of urban Indian consumers. It is based on a monthly survey of 3,000 consumers in 11 cities across India. A score above 50 reflects optimism, while below 50 is an indication of pessimism. In December 2014, of the 11 cities surveyed, 7 showed improvement over the previous month. The three cities with highest consumer confidence are Hyderabad, Mumbai and Mangalore.

 

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

The ZyFin Consumer Outlook Index of India (COI) has registered a score of 47.4 in December 2014, as compared to 46.3 in the previous month. Interestingly, the outlook of urban Indians is stronger in smaller cities, rather than metros.

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

The Spending Sentiment Index assesses willingness to make big-ticket purchases including homes, home appliances, four- and two-wheelers in the next six months. The index has improved to 40.3 in December 2014, from 37.7 in the previous month, driven by improvement in all product categories surveyed.

The Employment Sentiment Index, a unique measure of employment sentiment around the country, provides insights into job security and availability as well as expected household incomes of Indian consumers. The index is at 55.3 in November 2014, as compared to 56.2 in the previous month. Consumer outlook on employment has now been optimistic (score of over 50) for 12 consecutive months now.

The Inflation Sentiment Index is based on the largest monthly inflationary expectations survey in the world. In December 2014, the index improved to 31.1 from 29.6 in the previous month. A growing number of consumers believe that the inflation rate will moderate in the near future. This is in sync with actual inflationary conditions, as risks around food inflation subside and global crude prices decline.

Giving his views on the ZyFin Consumer Outlook Index numbers for the month of December, Mr. Debopam Chaudhuri, Chief Economist, ZyFin Research, said, Rising consumer sentiment is a precursor to increasing overall consumer expenditure. We expect this vital element of the Indian GDP to start expanding post a reduction in borrowing costs owing to the current high lending rates. The RBI is likely to adopt a softening interest rate regime by mid-2015..

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