With coronavirus aggravating economic slowdown which has been continuing for a year now, consumer confidence has fallen to lowest levels in six years in May 2020, and uncertainties regarding income and jobs also loom large. The situation is unlikely to improve till the coming year. “Consumer perception on the general economic situation, employment scenario and household income plunged deeper into contraction zone; while expectation on general economic situation and employment scenario for the year ahead were also pessimistic,” RBI said in its latest survey. The central bank had conducted telephonic interviews in thirteen major cities including Ahmedabad, Bengaluru, Bhopal, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai, Patna, and Thiruvananthapuram. Data pertaining to perceptions and expectations on general economic situation, employment, overall price situation and own income and spending has been collated.
Consumers cautious of impulse buy
With the economic downturn following the coronavirus and a prolonged slowdown of last year, customers remain skeptical of buying discretionary items and have sharply reduced their spending on impulse items, while overall consumer spending remained afloat. This can be attributed to relative inelasticity in essential spending, RBI said. The coming year also does not hold much promise.
“Consumer confidence collapsed in May 2020, with the current situation index (CSI) touching historic low and the one year ahead future expectations index (FEI) also recording a sharp fall, entering the zone of pessimism,” the central bank said. The current situation index (CSI) has fallen from 115.2 in March to 97.9 in May 2020, the lowest level since at least March of 2014, RBI data showed.
Consumers feel inflation is set to rise
More and more consumers are now of the opinion that inflation is set to rise soon. A majority of consumers who were surveyed by RBI are of the opinion that inflation has gone up and will go up in future too while 18.6% of those surveyed said that it has remained the same. One in every half of the respondents also said that their incomes have fallen with 74% saying that the economic situation has worsened.