Consumers worried over income growth prospects and job outlook: report

Consumers are worried over their income growth prospects, while businesses are very confident about their profit margins, as per a report by Motilal Oswal Financial Services

While the consumers’ spending outlook is bleak, businesses appear very confident on maintaining a strong order book. Although consumers are highly concerned over job outlook, employers are much more optimistic, the report said.

Never ever in the past has there been such wide divergence between the current assessment of the businesses and consumer sectors.

The current situation index of CCS almost halved to 50 in 2HCY20 and 1HCY21 from 100 in the pre-Covid period (i.e., 1HCY19). It has recovered since then, albeit, stayed very low at just 76.6 in 1QFY23. In contrast, the current assessment of businesses also plummeted to 56.5 in 1QFY21 from 108 in the pre-Covid period. However, it recovered dramatically to 100.6 in 2QFY21 and has been above 110 during the past four quarters.

As far as expectations are concerned, although the fall was not so large, consumers continue to remain considerably less optimistic than the pre-Covid period. In contrast, Indian businesses are the most optimistic in the past two decades, since when this data has been available.

Consumers’ category may remain cautious, as their financial position deteriorated significantly. If so, the expectation of a strong order book may actually reflect a shift in the market share (from the unlisted/unorganised/small to listed/organised/large companies), rather than the general broad-based improvement in the real economy, the report said.

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The Reserve Bank of India conducts Consumer Confidence Survey (CCS) and Industrial Outlook Survey (IOS) to make such informed expectations.

IOS provides an assessment of business situation of companies in the manufacturing sector and CCS renders an assessment of the consumer sentiments of the respondents based on their perceptions of the general economic conditions and own financial situation.