Consumer optimism highest in India

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7-point jump in second quarter: Nielsen study

Consumer optimism highest in India
Just a day after India played ‘chin music’ at Lord’s to lord over England, comes this. A global consumer confidence index study by Nielsen has placed India on top globally, thanks to a jump of seven points during the second quarter of 2014.

As per the index by Nielsen, a global information and insights provider, India was ranked second in the first quarter of 2013, with 121 points and is now the most optimistic country. Indonesia and Philippines follow next. Consumer confidence in India is now placed at 128 points at the end of the second quarter of this calendar year.

India posted the biggest quarterly index increase of the 60 countries measured with a rise of seven points, exceeding Indonesia’s score, which declined one point to 123. Confidence also increased in the Philippines (120), South Korea (53) and Malaysia (93) and held steady in China for a third consecutive quarter at 111, as per the Nielsen study.

“Consumers in India have indicated increased levels of confidence in the second quarter, when the country’s general elections were taking place,” said Piyush Mathur, president, Nielsen India.

“This buoyancy is yet to translate into increased consumption across sectors. Despite the ongoing inflationary trend and expectations of a poor monsoon, consumers are likely to open their purse strings as we head into the festive season in response to savvy marketing stimulus. The budget reveals a positive outlook for business. We expect this to reflect in consumer sentiment in subsequent quarters as well. The budget, which incorporates impetus and incentives for rural infrastructure, manufacturing, as well as better income tax exemptions for consumers, should bode well, but it needs to be watched closely,” he added.

The study’s revelations come at a time when the new government continues to battle high inflation, with both food and vegetable prices ruling high, even as fuel bills continue to be on an upswing, in spite of a change in government at the centre.

As per the survey, 60 per cent online respondents indicated that this is a good time to buy things they want and need, up six percentage points from last quarter (54 per cent in Q1 2014) and well over 80 per cent respondents were optimistic about job prospects over the next 12 months, a nine per cent increase from last quarter.

“India is the most optimistic globally about local job prospects over the next 12 months and is followed by the Philippines (77 per cent) and Indonesia (76 per cent),” the survey said. In addition, 79 per cent indicated that the state of personal finances was good or excellent in the second quarter 2014, up from 76 per cent in Q1 of 2014.

However, the top concerns amongst respondents continue to be job security (23 per cent) and the state of the economy (20 per cent). The concern on the state of the economy has increased by five percentage points over last quarter (15 per cent), it added.

According to Anuj Puri, chairman & country head, JLL India, “Consumption is a function of market sentiment, which in turn is closely linked with economic performance. The world over, the recessive wave slowed down most economies is now receding and key markets are in recovery mode”.

“While India benefits directly from this improvement, it has also witnessed the arrival of additional positivity after the new government was voted into power. Furthermore, the recently announced budget sent very clear growth signals across the country and beyond. This has had a very positive impact on India’s consumption story and will have a multiplier effect going forward,” Puri added.

“The sales in the retail or consumer durable sector hasn't really picked up. But with the government’s focus on sectors like infrastructure and real estate people are expecting good days are ahead and the consumer sentiment has definitely changed,” Debashish Mukherjee, principal, AT Kearney said. However, the positive sentiment of consumers is yet to get translated into actual sales, Mukherjee added.

Brotin Banerjee, managing director and chief executive officer at Tata Housing, said, “the formation of a stable government and the measures announced in the budget has brought in confidence among consumers”. However, pick-up in sales are expected in the next six months. Further government’s focus on affordable housing would result in developers launching more projects catering to the end-users would result in increased sales, Banerjee added.

“Sales in the retail sector has improved than what it was last six months back and is expected to improve going further,” said Sunil Biyani, director at Future Group.

“The general sentiments might be good, but, as of now I do not think this will benefit the jewellery trade,” says Bachraj Bamalwa, past chairman, All India Gems and Jewellery Trade Federation. “The government still thinks that the gold is behind the increase in Current Account Deficit. The apathy of the government is making people stay away from jewellery purchases even during the festive season.

Almost 60 to 70 per cent of jewellery purchases are for wedding purposes. The sentiments against the industry will affect the remaining 30 to 40 per cent sales,” Bamalwa pointed out.

On the other, Suresh Khanna, secretary general, Consumer Electronics and Appliances Manufacturers Association (CEAMA) feels that the growth in the consumer durable industry was sluggish over the last two years and it turned positive over the last couple of months, post the excise duty reduction from 12 to 10 per cent. “We expect the sentiment to continue to be positive during the coming festive season,” Khanna added.

According to the Nielsen study, global consumer confidence increased one index point to 97 in the second quarter of 2014, marking the highest level since first-quarter 2007. This forward momentum comes after a stagnant 2013, when confidence was stubbornly stuck at 94 for three out of four quarters.

Regionally, North America (103) and Europe (77) reported consumer confidence increases of three and two points, respectively, from the first quarter. Confidence was highest in the Asia-Pacific region, which held steady from the first quarter with a score of 106.

Confidence declined in the Latin America (90) and Middle East/Africa regions (93), dropping three points and one point, respectively.

(With inputs from Jharna Mazumdar in Mumbai, Sangeetha G & S Shyamala in Chennai)

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