Indian consumers sceptical of "worst is over" assessment

Mumabi: The CNBC TV18 - Boston Analytics Consumer Confidence Index for the month of May 2009 indicates a decline in consumer confidence as the index recorded its lowest reading at 71.0 a fall of 4.2 per cent from April's reading of 74.1.

The index is a monthly barometer of the opinion of Indian consumers regarding the current state and future expectations of the macro economy, household financial conditions and consumption, and is derived from a monthly survey of nearly 10,000 respondents across 15 Indian cities, making it the largest exercise of this kind in the country.

The index is computed from responses to 25 questions covering various variables known to affect consumer confidence. These variables pertain to general economic conditions, employment, inflation, interest rates, real estate, household financial conditions, household income, household spending plans, and savings.

The survey was carried out in the first week of May when exit polls across the country were still pointing towards another coalition in the centre with no single political party getting a clear majority.

Almost all components of the index - economic conditions, employment outlook, price levels, and consumer spending continue to signal pessimism.

This is the third consecutive month of decline for the consumer spending component of the index. After a marginal increase in the past month, the employment component has also fallen suggesting more pessimistic views regarding unemployment, job security and ease of creating alternative means of employment. Inflation continues to remain a concern for consumers primarily due to rising food prices.

The CNBC-TV18 Boston Analytics Consumer Confidence Index consists of two sub-indices - the Current Situations Index and the Future Expectations Index. This month the Current Situation Confidence Index registered a slight fall, while the decline in the Future Expectations Confidence Index was more pronounced.

The Current Situation Confidence Index has fallen marginally by 1.7 per cent from 71.4 in April 2009 to 70.2 in May 2009.

The Future Expectations Confidence Index dropped by 6.8 per cent from 77.6 in April 2009 to 72.3 in May 2009.

According to the results of the May survey, all components of employment confidence remained pessimistic. while spending on necessities rose in May compared to the two previous months, spending on consumer discretionary items continued to fall.

Overall, the consumer spending confidence component fell 8 per cent in May, spurred possibly, by the weak employment outlook as employment confidence component fell 5.1 per cent in May.