The MNI India Consumer Indicator fell 2.1 points to 124.1 in July from 126.2 in June. In spite of the slight easing in overall sentiment, consumers were increasingly confident about making big ticket purchases including cars.
All five components which make up the Consumer Indicator fell between June and July, apart from the Durable Buying Conditions Indicator which increased to the highest since March. A decline in respondents’ optimism about the current state of their finances had the largest downward impact on sentiment in July.
The government’s maiden budget, which took place two-thirds of the way through our survey period, didn’t live up to expectations and failed to provide much detail on specific policies. Still, the pre-announced extension to excise duty cuts on consumer durables and cars had a positive impact with the Car Purchase Expectations indicator hitting a four month high.
The majority of the survey took place ahead of the Modi government’s first budget so the full impact will not be visible until the August. While overall sentiment eased, comments from respondents showed that there is still a strong belief that Prime Minister Modi will be able to turn the economy around.
Consumers‘ dissatisfaction with the current level of prices eased for the second consecutive month, but expectations for inflation rose again after easing in June. Respondents were particularly concerned that the price of gasoline was likely to rise in the next 12months.
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, “Consumer sentiment slipped slightly in July from a Modi inspired rise in June, but remains at a relatively high level with respondents still reasonably confident that the new Prime Minister can kick-start the economy.”
“The government’s first budget was somewhat disappointing but we’ll have to wait until the August survey results to see how consumers viewed it. While they already seem to have welcomed the continued tax breaks on big ticket items, the overall lack of detail may well depress sentiment.”