Consumers’ confidence in economy wanes as inflation rises

November 25, 2021 (MLN): Consumers’ confidence took a dip during October and November indicating their worsening financial standing and poor economic outlook for the months ahead, findings of the State Bank of Pakistan’s November Consumer Confidence Index (CCI) survey showed on Wednesday.

The results of the latest Consumer Confidence Survey (CCS) conducted by SBP and IBA during 1-7th November 2021, showed that that an 8.7% decline in CCI can be attributed to a fall in the current economic conditions index (CEC) by 7.1% and the expected economic conditions index (EEC) dropped by 10% from its value in September 2021.

The overall CCI is calculated from survey results and evaluated within a range of 0-100, indicating an optimistic outlook when the index is above 50 while showing a pessimistic attitude towards future economic situations when it is below 50.

As far as inflation indices are concerned, the survey data showed that people expect overall inflation to decline marginally by 0.6% in the coming months compared to the last wave in September 2021. However, seen on a disaggregated level, i.e., food, energy, non-food non-energy (NFNE) shows higher inflation expectations.

According to the survey, consumers’ assessment of unemployment in the next six months, rose modestly by 2.33% to a reading of 70.03 from 68.44 in September 2021, indicating that consumers do not foresee the labor market gaining strength. While, the expectations index based on consumers’ outlook (next 6-months) for interest rate, surged by 5.42% to 67.55 from a reading of 58.59 in September. To note, the Monetary Policy Committee (MPC) of the central bank, recently jacked up the policy rate by 150 bps to 8.75 percent.

Furthermore, consumers’ sentiments about the suitability of time to purchase durable goods index over the next six months fell by 9.7% to 31.10 in November 2021 compared to the past six months period which was 34.44 in September 2021.

When asked about their future income to be increased a year later, consumers’ expectations dropped by 2.8% compared to the last survey conducted in September 2021. This might be due to a spike in inflation amid rising food and energy prices that could affect people’s real income.

Copyright Mettis Link News