Consumer Confidence Index drops 3.42% in survey’s May edition. PHOTO: EXPRESS
The May edition of the bi-monthly SBP-IBA Consumer Confidence Survey reveals that respondents expect an increase in the overall price level compared to the last survey.
“High inflation expectations are evident for all the commodity groups (including) food, energy, and non-food non-energy items,” according to the brief commentary on the latest survey.
Expectations about inflation actually have a significant role in determining the overall price level in an economy. Economists believe prices go up - or remain stable - partly because people expect them to.
The preceding two surveys conducted in January and March reflected the expectation of subdued inflation, but the latest one reveals that consumers expect otherwise now.
The survey covers three broad themes: inflationary expectations, overall consumer confidence indices and other key highlights about households’ perception of important indicators.
Consumer confidence
The Consumer Confidence Index (CCI) showed a decrease of 3.42%, as it slid to 163.17 points from 168.96 points recorded in March. An upward movement in the CCI shows improvement in the households’ perceptions about the state of economy while a downward trend shows otherwise.
The survey records households’ perceptions, which are relative to six months in the past and six months in the future, about personal financial conditions, the overall economy, unemployment and consumption of durable goods.
The CCI can be partitioned into current and expected economic conditions indices. The former, denoted by the Current Economic Conditions (CEC), registered a decrease of 4.71% from the March edition.
Similarly, the latter index, which is denoted by the Expected Economic Conditions (EEC), dropped by 2.09% from its value in the previous survey.
The CCI and its two sub-indices recorded a decrease for the second time in a row, denoting deterioration in the households’ perceptions about the state of economy.
Inflation outlook
In its latest monetary policy statement, the State Bank of Pakistan (SBP) said inflation will “attain a higher plateau” in coming months.
Inflation has already been rising for seven consecutive months. Core inflation, which excludes food and energy items with more volatile price movements, is also indicating “underlying inflationary tendencies,” according to the SBP.
Month-on-month inflation, measured by the Consumer Price Index (CPI), increased 1.5% in April, which was the biggest monthly rise since July 2014, according to Elixir Securities. This resulted in the year-on-year inflation of 4.17%, bringing the average inflation for July-April to 2.8%.
The SBP-IBA team conducts a stratified random telephone survey of more than 1,750 households across Pakistan every two months. Of these, 66% households were fresh interviewees while about 33% households were interviewed in the previous edition as well.
Published in The Express Tribune, May 31st, 2016.
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