Consumer Confidence dips slightly in the RBI’s Forward Looking Surveys
Sai Krishna Muthyanolla
April 24, 2021
The RBI recently released the results of the March round of ‘Forward-Looking Surveys’. Both the Current Situation Index (CSI) and the Future Expectations Index (FEI) related to consumer confidence dipped slightly in the latest survey as compared to the previous survey. The business expectations index, however, showed an improvement. The impact of the second wave of COVID-19 on these indices will be only known in future surveys.
On 07 April 2021, RBI released the results of ‘Forward-Looking Surveys’. The RBI periodically conducts surveys on various aspects such as consumer confidence, industrial production, inflation expectations, etc. to understand the prevailing economic conditions in the country. In this story, we take a look at a few of the critical observations from these surveys and explore the trends over the period of time.
Consumer Confidence Survey (CCS)
The Consumer Confidence Indices comprise of Current Situation Index (CSI) and Future Expectations Index (FEI). The Current Situation Index measures the overall consumer sentiment regarding the present economic situation. It is an indicator of consumer sentiment about current business and job market conditions. The Future Expectations Index is used to gauge future trends. The Future Expectations Index indicates how business conditions, employment, and income would likely change over the next year. In other words, the Consumer Confidence Survey gauges consumer perception and expectations on the following:
Businesses, investors, and economic policymakers watch these indices along with other related indicators to help gauge near-term consumer demand. One of our previous articles details the intricacies involved in the Consumer Confidence Survey.
The survey was conducted through field interviews during 27 February and 08 March 2021 in thirteen major cities, viz., Ahmedabad, Bengaluru, Bhopal, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai, Patna, and Thiruvananthapuram. Perceptions and expectations on the general economic situation, employment scenario, overall price situation, and own income and spending have been obtained from 5,372 households across these cities.
Highlights of the Consumer Confidence Survey:
In order to understand these major highlights, let us take a look at specific parameters of the Consumer Confidence Survey.
Spending in further divided into essential and non-essential categories.
Households’ Inflation Expectations Survey
The Households’ Inflation Expectations survey seeks qualitative responses from households on price changes (general prices as well as prices of specific product groups) in the three months ahead as well as in the one year ahead period and quantitative responses on current, three months ahead, and one year ahead inflation rates. The results of this survey provide useful inputs for monetary policy. The survey was conducted through field interviews on 27 February and 08 March 2021 in 18 major cities. The results are based on responses from 5,955 urban households. The survey aims at capturing subjective assessments on price movements and inflation, of approximately 6,000 households, based on their individual consumption baskets, across 18 cities, viz., Ahmedabad, Bengaluru, Bhopal, Bhubaneswar, Chandigarh, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai, Nagpur, Patna, Raipur, Ranchi, and Thiruvananthapuram.
Highlights of the Households’ Inflation Expectations Survey:
Industrial Outlook Survey of the Manufacturing Sector
The Industrial Outlook Survey (IOS) encapsulates a qualitative assessment of the business climate by Indian manufacturing companies and their expectations. In all, 967 companies responded in this round of the survey. The 93rd round of the IOS was conducted during January-March 2021 and owing to uncertainty driven by the COVID-19 pandemic, an additional block was included in this round of the survey for assessing the outlook on key parameters for two quarters ahead as well as three quarters ahead.
The business assessment index (BAI) showed a significant dip in Q1 of 2020-21 and improved thereafter. The BAI extended further to 113.1 in Q4 of 2020-21 from 108.6 in the previous quarter. The business expectations index (BEI) showed a decline through 2020 and improved thereafter. The BEI has increased to 119.6 in Q1 of 2021-22 from 114.1 in Q4 of 2020-21.
Highlights of the Industrial Outlook Survey of the Manufacturing Sector:
Assessment for Q4 of 2020-21
Expectations for Q1 of 2021-22
Expectations for Q2 & Q3 of 2021-22
While things sound favourable in terms of the overall business climate, it has to be noted that these surveys were conducted before the onset of the COVID-19 second wave in India which is causing severe distress across the country. The impact of the second wave and vaccinations will only be known in future surveys.