Economy Jan 30, 2013
Mumbai: The downward trend in consumer optimism is likely to continue this year due to adverse macro conditions, high inflation and slower growth in the domestic economy, according to a survey by Credit Suisse.
"The decline in consumer optimism observed in 2011 further intensified last year, owing to continued adverse macro conditions, high inflation and slower growth in the domestic economy. Going by the initial trends, it is unlikely to witness any major shift this year as well," Credit Suisse India Consumer Survey 2013 said.
"There are instances of consumers delaying buying decisions as they cut down on lavish spending because of the economic uncertainty. "While two years ago, Indians were confident about their personal finances, past two years have seen a significant deterioration with the survey respondents expecting their personal finances to get worse, rising from 3 per cent in 2010 to 11 per cent in 2012," the survey said.
This trend is reflected in the commentary of many companies who operate in discretionary consumption categories and are indicating a slowdown in growth rates, it said. Consumers are clearly more worried and more people expect lower salary increases and personal finances to worsen, making it a bad time for large-ticket purchases this time around as compared to last year, Credit Suisse Equity Research Vice- president Arnab Mitra said.
Only 30 percent respondents saw marginal salary hikes in 2012. On the other hand, income of 20 percent declined in 2012. Consequently, fewer people felt this was a good time to make major purchase (the numbers fell from 73 per cent in 2010 to 66 percent in 2011 and 59 percent in 2012.
Consumers remained extremely risk-averse and keenness to invest in stock markets remained low with just 4 per cent respondents trading stock markets. Preference towards gold and insurance was increasing while bank account savings remained steady, it said.
With falling optimism and uncertainty about future, domestic consumers are now saving more with the percentage of income saved increasing from 28 in 2011 to 32 in 2012, while cutting down on spending. The most notable changes in the overall spending trend are an increase in food spending and reductions in both education and housing spending, Mitra said.
The survey points out that although mobile penetration went up, only a few people bought smart phones and more now want to buy an entry-level cars. Survey said spending patterns show a significant divergence across rural and urban markets.
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