India consumer confidence drops to record low, central bank survey shows

Mumbai: Indian consumers’ confidence is plumbing new lows, adding to a string of grim data in an economy clobbered by the world’s worst coronavirus outbreak.

The current situation index fell to a record 48.5 in May from 53.1 in March, according to the Reserve Bank of India’s consumer confidence survey, where 100 is level that divides pessimism from optimism. Respondents were also bleak about the year-ahead prospects, with the future expectations index dropping to 96.4 from 108.8 in the period under review, the RBI said.

“Household spending also weakened in the latest survey round,” according to the RBI, which cited consumers’ concern about about the economic situation and job prospects. Even essential spending was “showing signs of moderation while non-essential spending continues to contract.”

That’s bad news for an economy primarily driven by consumption, with high-frequency indicators progressively showing weakness in everything from retail activity to road congestion and power demand to rising unemployment levels.

Inflation expectations rising

Another survey pointed to inflation expectations getting well entrenched, adding to the challenge for monetary policy makers who halted interest rate curs more than a year ago because of gains in price-growth. Sticky underlying price pressures since then have kept the rate-setters from resuming the easing, including at their latest meeting that concluded Friday.

Households’ median inflation perception for the current period jumped by 150 basis points to 10.2% while the inflation expectation for three months rose by 70 basis points to 10.8%, compared to the March 2021 survey, the RBI said. Median inflation expectations for one-year ahead also remained at an elevated level at 10.9%.