Consumer sentiment improved for the second consecutive month in February, providing a further sign that the extended downturn in confidence has come to an end.
The MNI India Consumer Sentiment Indicator rose to 121.2 in February from 120.4 in January. The rise in consumer sentiment over the past two months has been small but significant following the descent over the past year. While sentiment remains above the 100 breakeven level, meaning optimists outnumber pessimists, it still lies below the series average of 123.3. It’s also down 5.2% on the year.
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, “Consumer sentiment is still down compared with a year ago but the good news is that the sustained downturn seen over the past year may have finally come to an end.”
The current environment presents a number of positives for consumers including record low inflation and lower interest rates. A further fall in inflation expectations in February suggests the central bank has room to ease rates again over the coming months which should help to underpin sentiment, he said.
The improvement in consumer sentiment was driven by increasing optimism on the current situation, with both current Personal Finances and Durable Buying Conditions rising. The former, however, is still down more than 7% compared with February 2014. The sharp reduction in inflation has provided greater confidence to consumers when managing their household monthly budget and provided a wealth effect. The January interest rate cut would also have helped and the March reduction should also feed through next month. The survey results showed respondents were the most satisfied with the current level of prices since December 2012, while inflation expectations for 12 months’ time declined very close to the lowest in the survey’s history.
There was also increased optimism on the automobile market. Consumers expressed a greater willingness to purchase a car in the next 12 months despite the recent withdrawal of tax concessions.
The first full budget of the Modi government came after the survey period was over in February.