Consumer confidence for the current period declined for the second consecutive survey round after a prolonged rising trend in the post-Covid period, according to the  bi-monthly consumer confidence survey released by the Reserve Bank of India.

Consumer sentiments on major parameters, except spending, moderated and as a result, the current situation index (CSI) declined to 93.9 in July 2024 from 97.1 two months earlier.

Households’ optimism on economic conditions for the year ahead also decreased from the previous survey round. Lower optimism on the general economic situation, employment, and prices led to a 4.1-point decline in the future expectations index (FEI), which fell to 120.7 in July 2024.

Sentiments on the current employment situation and personal income deteriorated for the second consecutive survey round.

The survey collects current perceptions compared to a year ago, as well as one-year-ahead expectations of households regarding the general economic situation, employment scenario, overall price situation, personal income, and spending across 19 major cities. The latest round of the survey was conducted from July 2 to 11, 2024, covering 6,062 respondents. Female respondents accounted for 54.4 per cent of this sample.

Household sentiments have also been impacted due to rising food prices. Households’ median perception of current inflation rose by 20 basis points (bps) to 8.2 per cent in the latest bi-monthly inflation expectations survey of households. Their inflation expectations for the three months and one year ahead periods also increased by 20 bps each. A larger share of households expects higher general prices and inflation as compared to the May 2024 survey round. Marginally higher price and inflationary pressures were reported across major product groups. For one year ahead period, inflation expectations were closely aligned to food prices, housing and cost of services.

“High food inflation adversely affects household inflation expectations, which have a significant impact on future trajectory of inflation. Household inflation expectations, after witnessing a moderating trend between May 2022 and September 2023, have edged up on the back of high food inflation since November 2023. Persistently high food inflation and unanchored inflation expectations – if they materialise – could lead to spillovers to core inflation through pick-up in wages on cost-of-living considerations. This, in turn, could be passed on by firms in the form of higher prices for services as well as goods, especially in a scenario of strong aggregate demand” Shaktikanta Das, Governor, RBI had said on Thursday.

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