Consumer Sentiments Fall Sharply In May-end, More in Rural than Urban

Given that the fall was more striking in rural India, it is quite possible that the controls on wheat and sugar export could be responsible. Detailed report below.
Consumer Sentiments Fall Sharply In May-end, More in Rural than Urban

Consumer sentiments fell sharply in the last week of May, more so in rural India than urban, on the back of the export ban on wheat and sugar and higher inflation. 

Also, the index of consumer sentiments (ICS) tanked by 9.4 percent in the week ended May 29. While the ICS fell by 5.9 percent in urban regions, the fall was much steeper by 11.4 percent in rural regions, according to a report Centre for Monitoring Indian Economy (CMIE). 

“Given that the fall was more striking in rural India, it is quite possible that the controls on wheat and sugar export could be responsible,” the report further said. 

 “We may conjecture that measures to control inflation hurt sentiments in rural India but the continued elevated inflation hurts urban India,” CMIE added in its weekly labor market analysis.

Though the 30-day moving average as of May 29 dropped to 67.91, it was still higher than April 2022 at 67.2 and CMIE says ICS could be higher in May compared to April, which would be the highest compared to any month since March 2020 i.e. before the lockdowns.

“However, there are signs that the steady improvement in consumer sentiments seen so far during 2022 may be slowing, or even reversing,” it cautioned.

According to CMIE, the slender growth in May implies a slowing down of the monthly growth rate of the ICS. From January through April, the ICS saw monthly growth rates between 3 percent and 5 percent.

“Compared to other economic indicators, the recovery in the ICS from the lockdown-induced drop in April 2020 has been distinctly slower,” CMIE said, adding ICS, which includes perceptions about the current and future well-being of households, takes longer to recover from a severe economic shock.

The ICS grew by 4 percent in January and 5 percent in February but slowed down to 3.7 percent in March and further to 3 percent in April. CMIE expects ICS growth to slow down further to probably to less than 1 percent in May.

As per the CMIE, what is most worrisome is that the recent reversal is moving at a distinctly faster pace than the pace of the recent rise. The fall in the 30-DMA between May 20 and May 29 is at the rate of 0.34 percent compared to the rise between April 30 and May 20 at the rate of 0.22 percent per day.

“The trajectory of the ICS is changing because consumer expectations are turning adverse at a faster pace than consumer perceptions regarding their current well-being,” it added.

READ MORE: Indian Consumers Making Wiser Life Choices: Work Harder, Prioritize Well-being, yet Save Up for Future
 

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