Consumer Confidence Index 2020 | UPSC

Consumer Confidence Index 2020 | UPSC

      HEADLINES:

RBI: Consumer confidence Index 2020 ; at all-time low in Sept, set to improve in next 12 months

      WHY IN NEWS:

The consumer confidence index declined to 49.9 in September, as against 53.8 in July.

SYLLABUS COVERED: GS 3: Reports

      LEARNING: 

For PRELIMS there are few important definitions and a formula used in this report . They are quite important .

For MAINS analyse this report with previous data , Predict the future CCI index . Note down the key comparisons found in your Mains book .

      ISSUE: 

The RBI’s survey on the manufacturing sector shows further improvements in production, capacity utilisation and order books.

  • Consumer confidence remained at an all-time low level in September.
  • The general economic situation had been worsening during the month.
  • However, the situation is set to improve in the next 12 months, the survey said.

The consumer confidence index declined to 49.9 in September, as against 53.8 in July.

  • The index has improved from 105.4 to 115.9 on a one-year ahead expectations basis.
  • This is indicating a recovery in the consumer confidence level over the next 12 months.
  • On the inflation RBI survey said households’ median inflation expectations remained elevated.

Consumer Confidence Index 2020 | UPSC

CREDITS : RBI 

CALCULATION

  • The current situation index (CSI) recorded its third successive all-time low.

The future expectations index (FEI) improved for the second successive survey round, the survey said.
 

  • As the respondents perceived further worsening in general economic situation and employment scenario during the last one year.
  • Households were, however, more confident for the year ahead.

FUTURE EXPECTATIONS INDEX (FEI)

  • The CCI reflects consumers’ short-term—that is, six-month—outlook for, and sentiment about, the performance of the overall economy as it effects them.

The Future Expectations Index is made up of the average of the CCI components .

  • It deals with six-month outlooks for business, employment, and income.

CURRENT SITUATION INDEX

  • The Present or Current Situation Index is an indicator of consumer sentiment about current business and job market conditions.

Combined with the Expectations Index, the Present Situation Index makes up the monthly Consumer Confidence Index. 

  • Businesses, investors, and economic policymakers watch the Present Situation Index along with related indicators.
  • This will help gauge near-term consumer demand.
  • Overall financial situation was assessed to have improved.
  • Respondents maintained negative sentiments on selling prices and profit margins in Q2 of 2020-21, though pessimism moderated.

According to another survey on the economic growth, real gross domestic product (GDP) is likely to contract by 9.1 per cent in 2020- 21 .

  • It is expected to recover next year, when it is expected to grow by 8.2 per cent.
  • Real private final consumption expenditure (PFCE) is assessed to contract by 11.0 per cent during 2020-21.
  • Real gross fixed capital formation (GFCF) is projected to record a large decline of 21.0 per cent in 2020-21.

SURVEY AND RESPONSES

  • As per CSS, 74.4 per cent of the respondents felt that the current perception on the general economic has worsened.
  • 11.2 per cent (19.3 per cent) said it has remained same
  • 14.4 per cent (28.4 per cent) said it has improved.

EMPLOYMENT

  • 67.4 per cent (55.7 per cent) of the respondents felt that the current perception on employment has worsened.
  • 13.4 per cent (19.1 per cent) said it has remained same.
  • 19.2 per cent (25.2 per cent) said it has improved.

INCOME

  • 53.4 per cent (24.9 per cent) of the respondents felt that the current perception on income has decreased.
  • 34 per cent (52.4 per cent) said it has remained same
  • 12.6 per cent (22.7 per cent) said it has increased.

SPENDING

  • 56.1 per cent (72.6 per cent) of the respondents felt that the current perception on spending has increased
  • 31 per cent (24 per cent) said it has remained same
  • 12.9 per cent (3.4 per cent) said it has decreased.

PRICE LEVEL

  • 79.1 per cent (87.2 per cent) of the respondents opined that the current perception on price level has increased
  • 17.5 per cent (10.3 per cent) said it has remained same
  • 3.4 per cent (2.6 per cent) said it has decreased.
Consumer Confidence Index 2020 | UPSC

CREDITS : RBI

      IASbhai WINDUP: 

  • More respondents reported curtailment in both overall and essential spending during the past one year, when compared with the last survey round.
  • Consumers expect improvements in general economic situation, employment conditions and income scenario during the coming year.
  • Discretionary spending, however, is expected to remain low in the near future.

STEEP DECLINE

  • Consumer confidence collapsed in May 2020, with the current situation index (CSI) touching a historic low .

One year ahead future expectations index (FEI) also recording a sharp fall, entering the zone of pessimism-RBI

IMPACT
The CSI fell to 63.7 in May 2020 vis-a-vis 85.6 in March 2020.The FEI was down to 97.9 vis-a-vis 115.2.
  • COVID-19 pandemic and the resulting lockdown and slowdown has cast a long shadow on the economy.
SUGGESTED READING : https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/CCS2BEB9B0E550843B792856ABCFA9CC08D.PDF 
     SOURCES:THE HINDU & PIB | Consumer Confidence Index 2020 | UPSC

 

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