Consumers concerned about inflation & job outlook: BluFin

In a report released by BluFin, the financial information company stated that the consumer confidence index dropped to 40.3 in June, the worst in the previous five months.

In an interview to CNBC-TV18, COO Alay Desai said that consumers are concerned about inflation, interest costs and the employment outlook in the country, three factors which hurt the confidence index the most. “Consumers have been pessimistic about inflation as well as spending aspects from last few months, but June saw a downward trend on the employment side for the first time and that is having a triple whammy effect on the overall consumer confidence index,” he explained. This was the first month in which the employment sentiment index dropped, a sign that the job outlook is weak, and this was the turning point for consumer confidence. Going forward, Desai says the recovery of the Indian economy is dependent on the monsoon, and that the next two months are going to be critical. Below is an edited transcript of his interview with Latha Venkatesh and Ekta Batra. Also watch the accompanying video. Q: June is turning out to be worse than the previous five months? A: Yes, for the first time in last five months we are seeing a downward trend. The consumer confidence index declined and it is now at 40.3. Q: What are the major causes of the pessimism? Do consumers reflect pessimism about any specific situation like perhaps employment or growth? A: Basically in June one of the first things that we have noticed is employment sentiment index also declined for the first time on the basis of weaker job outlook. This has been the turning point with the largest decline. Consumers have been pessimistic about inflation as well as spending aspects from last few months, but June saw a downward trend on the employment side for the first time and that is having a triple whammy effect on the overall consumer confidence index. Q: Do you see further pessimism coming in from the inflation side in terms of preliminary readings for July? A: It would be too early to comment on the preliminary readings for the July because we have our ongoing rolling survey throughout the entire month. However, we have another property, the business cycle indicator, and when you combine the two effects what we are definitely seeing is that a lot of the recovery for India depends highly on monsoon. If it does not recover, it’s going to drive further pessimism across consumers, driven largely by the inflation and the higher interest rates coming in to counter that inflation. So it s going to be very critical next two months to see how the monsoon comes about and we definitely see a correlation there. Q: Can you give us a color on which sectors exactly are impacted by either lower or higher spending sentiment? A: We track spending sentiment across four primary sectors - one is the consumer durable, second is the two wheeler, the third is the four wheeler and finally the home sales. What we are seeing here is for the month of June, the four wheelers buying sentiment decreased the highest. It went down to 14 points and that has been the largest decline of 8.8 points over the previous month. Consumer durables have been holding steady, but the other big ticket item home sales has also seen slight down tick to a flattish trend after the last RBI cut. So overall, what we are seeing is that inflation concerns which come in will be highly correlated to the four wheeler as well as the home ticket items. When the monsoon is much better we will see an uptake in the two wheelers and that has yet to be seen.