RBI survey says consumer confidence in July remained weak

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Consumer confidence in July remained weak and the Current Situation Index (CSI) continues to be around all-time low levels, the Reserve Bank of India (RBI) has said.

“Consumer confidence for the current period remained weak and the Current Situation Index (CSI) stood at an all-time low level recorded in the previous survey round as most households reported lower incomes and higher level of price as compared to a year ago,” the RBI said in its Consumer Confidence Survey, July 2021.

Consumers optimistic

The study, however, added a note of optimism. “Driven by substantial improvements in the outlook for general economic situation and employment scenario after the waning of the second wave of the Covid-19 pandemic, the future expectations index (FEI) returned to optimistic territory; respondents placed higher confidence on household income going forward.”

While the current situation index for July stood at 48.6%, little has changed from the previous surveys of March, 2021 and May 2021, the future expectations index increased to 104% in July from 96.4% in the May survey. An index value of above 100 indicates optimism.

‘Contraction in discretionary expenditure’

The sentiment on overall spending remained unchanged as higher spending on essential items were offset by a drop in non-essential expenditure, the central bank said, adding that “consumers expect further contraction in  discretionary expenditure in the year ahead.” Perception for price level and income deteriorated in the July survey compared to May study. Price level perception was -91.9% in July and -89% in May. As far as income is concerned, the perception was -59.1% in July in comparison with -50.1% in May.

Policy rates unchanged

“With the gradual withdrawal of Covid-19 related restrictions in most states, the survey was conducted through physical interviews, wherever possible, and telephonic interviews elsewhere, during June 28 to July 9, 2021 in 13 major cities– Ahmedabad, Bengaluru, Bhopal, Chennai, Delhi, Guwahati,  Hyderabad, Jaipur, Kolkata, Lucknow Mumbai Patna and Thiruvananthapuram,” the RBI said.

Continuing with its accommodative stance, the RBI has kept the policy rates unchanged at 4% for the seventh time in a row.