Consumer confidence rose to its highest level since November of last year, led by more optimistic expectations for future business conditions, while sentiment towards spending took a back seat.
The MNI India Consumer Sentiment Indicator rose 2% to 113.4 in April from 111.2 in March. Sentiment, though, was down 7.1% compared with the same month a year ago, and 6% below the series average. More positively, it is up from the recent trough seen in December, which had left it at the lowest level in the history of the survey. The rise in April marks a good start to Q2, after it fell to a record low level in the previous quarter. Should this optimism continue it could prompt a turnaround in overall consumer spending.
The rise in confidence was mainly driven by the expectation of better things to come in the future. The Expectations Indicator, which is made up of three forward-looking components, rose to 118.7 from 115.5 in the previous month, the highest sinceAugust 2015. Meanwhile, views about the current situation improved slightly to 105.5 after falling to a historical low of 104.8 in March.
Respondents’ assessment of household finances improved, with the current measure rising further above the 100 mark, indicating optimists outnumbered pessimists. More consumers reported higher income as the reason behind better finances, while a rising proportion of the panel credited it to better employment. Consumers were less downbeat about the current business environment, and greater optimism in the general economy also influenced expectations for business conditions ahead and the outlook for employment.
Of the five components that comprise the Consumer Indicator, only Durable Buying Conditions fell this month. It seems like the hike in the service tax and a new levy on all services, announced in the budget in February, has tempered sentiment.
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, “The second consecutive rise in Indian consumer sentiment is a welcome result, following the trend decline over the past year. Much of the improvement in sentiment though hangs on an expected turnaround in business conditions. More tangible factors such as purchase sentiment weakened, not least due to the recent hike in the service tax.
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