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Inside the Minds of Consumers: Economic Sentiments & Outlooks

Consumers’ minds matter. A consumer sentiment index measures the degree to which individuals feel optimistic about their ability to make purchases in the near future. When assessing the economy as a whole and an individual’s financial status, consumer confidence is used, and the two are commonly highly associated.

Consumers’ propensity to buy goods and services drops dramatically when they have doubts about the economy’s future. On the contrary, people loosen their purses as the economy improves for two reasons: they have more disposable income and worry about the future economy less.

The Reserve Bank of India (RBI) conducts a survey bimonthly termed the Consumer Confidence Survey (CCS) to gauge consumer sentiment regarding the current state of the economy and their expectations for the future. The Customer Satisfaction Index (CSI) compares how customers feel now based on last year’s performance, while the Future State Expectations Index (FSI) looks at how customers feel now about the next year. Perceptions of “economic situation, income, spending, employment, and the price level” for the current period are all part of the CSI and FEI. The summary of Net Responses for CSI and FEI, which is the difference between respondents’ reported optimism and pessimism rates, is shown in the following table.consumer-sentiments-outlook-marketexpress-in

It is clear from Table 1 that from January to March 2023, consumers’ perceptions of their current and future levels of confidence have increased. The outlook for the future perception is clearly not in the dismal range, but it lacks improvement since February 2023, either. However, even though it is still in the pessimistic range, current perception has improved by 2.6 percent.consumer-sentiments-outlook-marketexpress-in

If we delve deep, we may assess consumer attitudes across dimensions including economic perspective, employment, price level, income, and spending. The variation in responses for each segment from January to March 2023 is depicted in Figure 1. Clearly, the pace of transformation in CSI subsystems is higher than that of FEI. Based on the prior year’s economic performance, consumers have greater optimism over their job security, income, and general financial status. However, even though they anticipate more employment in the coming year, they have unfavorable attitudes toward the economy, the level of prices, and their level of income.

The data suggests that consumers are experiencing an increased sense of assurance regarding their outlook, leading to a greater inclination to engage in high-value transactions or allocate funds towards discretionary expenditures, as opposed to essential ones. Under such circumstances, it can be anticipated that consumers will tend to exhibit a more liberal approach towards their expenditure, owing to the likelihood of having a greater disposable income and a reduced concern regarding economic adversities.

The opinions expressed in this article are the author’s own and do not reflect the view of MarketExpress – India’s first Global Analysis & Sharing Platform or the organization(s) that the author represents in his personal capacity.