Consumer outlook index confirms economic recovery, score turns optimistic for first time in three years

COIMBATORE: ZyFin Research’s Consumer Outlook Index (COI) has crossed into the optimism zone for the first time in three years after receiving a 4.9-point boost to 50.1 in October. This shift in consumer sentiment is the earliest signal that India’s growth story is set to resume.
The index has improved by a total of 9.5 points since posting a score of 40.6 in April this year.The current increase is driven by a strong improvement in willingness to spend, particularly among younger Indians.
Incidentally, the US Consumer Sentiment Index also reached a seven-year high this October.
The COI, a barometer for consumer confidence, reflects current and future spending plans, employment and inflation outlook of urban Indian consumers. It is based on a monthly survey of 3,000 consumers in 11 cities across India. A score above 50 reflects optimism, while below 50 is an indication of pessimism. In October 2014, of the 11 cities surveyed, seven turned optimistic. The three cities with highest consumer confidence are Mumbai, Hyderabad and Indore.
“With consumer spending making a comeback, economic growth is expected to bounce back to sustainable levels,” said Debopam Chaudhuri, chief economist, ZyFin Research.
The improvement in the index since April is a strong indication of growing consumer belief in a forthcoming economic recovery, ZyFin, a leading macro-analytics firm focused on the emerging markets, said. Interestingly, confidence among urban Indians is currently strongest in the smaller Indian cities, rather than metros.
The Spending Sentiment Index, which assesses willingness to make big-ticket purchases including homes, home appliances, four and two-wheelers in the next six months, improved to its highest ever level of 41.2 in October, from 32.3 in the previous month, driven by improvement in all product categories surveyed.
“Willingness to spend is a precursor to actual demand. The current uptrend is, therefore, an early signal of a possible recovery in sectors such as automobile, consumer durables and real estate over the next four to six months,” ZyFin stated.
The Employment Sentiment Index, a measure of employment sentiment around the country, jumped to the highest ever score of 55.4 in October.
The Inflation Sentiment Index, which is based on the monthly inflationary expectations survey in the world, improved to 27.4 from 25.8 in the previous month. “A growing number of consumers believe that the inflation rate will moderate in the near future,” ZyFin said.