CNBC-TV18 Boston Analytics: Jul consumer confidence at 71.9

Published on Wed, Aug 05, 2009 at 12:27 |  Source : CNBC-TV18

Updated at Wed, Aug 05, 2009 at 15:47  

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The CNBC-TV18 Boston Analytics consumer confidence index for July has come in at 71.9, down 1.2% relative to the June reading of 72.8. Consumer spending slipped to its lowest level falling 6% in July. Employment confidence too fell to its lowest level and stands at 4.6% in July. The analysis has been drawn up after interviewing nearly 10,000 respondents across 16 cities.

Sam Thomas, Head Research, Boston Analytics, and Professor of Case Western Reserve University said that what was unusual this month was that the current situation index actually rose 3.5% while the future expectations index dropped by 2.7%. He said that consumers are still very worried about the employment situation thus causing them to save more. This savings, he concluded was affecting the consumer spending.

Saugata Gupta, CEO of Marico said that consumer spending had been dampened due to higher inflation quarter on quarter. He added that he saw higher agricultural inflation due to deficient monsoon.

Here is a verbatim transcript of the exclusive interview with Sam Thomas and Saugata Gupta on CNBC-TV18. Also watch the accompanying video.

Q: What is the evidence at Marico from consumer purchase patterns in A- cities and B and C cities? Are you seeing any sluggishness or are your findings quite different from the consumer confidence survey out here?
A: There is a bit of down trading that continues to happen in the urban areas. The rural story was very good, I think there could be some issues if the monsoon continues to play truant because by now whatever damage that has happened to the Kharif crop or lat sowing that would have happened. We are seeing some kind of inflation which is hitting. Inflation is basically in the prices of pulses, in the prices of sugar, prices of vegetables which is mostly because of the impending monsoons. So there is a bit of dampener that is actually compensating for the entire feel good factor which was there in stock market, Q1 results. So there could be some bit of dampener going forward.

Q: Even this survey does indicate that confidence is now declining in the Tier III cities, do you think this is mostly because of what has happened due to monsoons and in that for the quarter underway demand could actually be slipping as we speak?
A: It is too early to say demand will be slipping, we will get a feel more closer towards Q3 because that is the time when we will see the Karif season and you will see the crop output but what is little bit of a concern is that if inflation might peak and start going up. Currently it's showing negative only because of the higher base, which was last year but if you see on a sequential quarter basis the prices are going up. So an inflation coupled with the fact that consumption doesn't increase which will lead to a further fiscal deficit might be a worrying thing as you go into Q3.

As of now, the trend has not significantly improved but at the same time worst is over as far as some of the industries are concerned.

Continued on next page ...

  

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