Consumers stuck in savings mode

Consumers stuck in savings mode
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First Published: Thu, Oct 01 2009. 01 15 AM IST

Low demand: Consumer durables displayed in a Gurgaon mall. The study revealed that the bounce in the economy is probably fuelled by the government’s stimulus packages rather than consumer spending. Ha
Low demand: Consumer durables displayed in a Gurgaon mall. The study revealed that the bounce in the economy is probably fuelled by the government’s stimulus packages rather than consumer spending. Ha
Updated: Thu, Oct 01 2009. 11 36 AM IST
Mumbai: The Indian consumer is proving to be a tightfisted king. In September, the CNBC-TV18 Boston Analytics Consumer Confidence Index dropped 1%, coming in at 68.95, compared with 69.6 in August.
With worries about the poor state of employment and rising retail inflation, consumers are showing an increased propensity to save. The savings component of the index showed a rise and posted sluggishness in borrowing.
Low demand: Consumer durables displayed in a Gurgaon mall. The study revealed that the bounce in the economy is probably fuelled by the government’s stimulus packages rather than consumer spending. Harikrishna Katragadda / Mint
The study also revealed that the bounce in the economy is probably fuelled by the government stimulus packages rather than consumer spending. Policy emphasis on large stimulus at the aggregate level has not trickled down to the individual level of the urban consumer as yet.
The upcoming festive season does not seem to have brought any cheer either. Spending plans remain extremely weak, reflecting the sombre mood of the Indian consumer. A comparison of festive season data shows consumers are not ready to spend even on discretionary items.
Only 205 of the respondents were willing to buy consumer durables this festive season, as compared with 60% during the same period last year.
The future expectations index has also fallen 1.8%, from 65.6 in August to 64.4 in September, posting a record low. And with consumer confidence that the employment situation will improve also falling, the immediate future down not look too rosy.
However, Indian industry maintains that demand has just started picking up and argues that the sluggishness seen in September was more due to sentimental reasons rather than practical compulsions.
“If you were to look at the last couple of weeks, it was actually a period when typically the shopper is not out there shopping because it is a period which is not good for buying durables. But otherwise, if you look at the trend prior to this inauspicious period—and even as we come out of this period—year-to-date we are growing 25-30%. This has been accelerating to 35-40%. Internal plans are strong and positive, outlook is positive,” says V. Ramachandran, director of marketing at LG Electronics India Pvt. Ltd.
Some experts say this index may continue to fall over the next couple of months. However, when studied retrospectively, the larger picture shows that the pace of the fall has reduced significantly. There are even signs that the index is flattening. Nevertheless, we may have to wait a while before a trend-reversal becomes evident.
cnbctv18@livemint.com
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First Published: Thu, Oct 01 2009. 01 15 AM IST
More Topics: CNBC-TV18 | Consumers | Savings | Retail | FMCG |