People’s perception: Consumers turn pessimistic about economic conditions

SBP-IBA survey reveals decrease in Consumer Confidence Index.


Kazim Alam July 24, 2014

KARACHI:


Consumers’ perceptions about current and expected economic conditions in Pakistan have shown ‘some decline’ after consecutive improvement since the beginning of 2014, according to findings of the recently released Consumer Confidence Index (CCI).


Jointly conducted by the State Bank of Pakistan (SBP) and the Institute of Business Administration (IBA) every two months, the consumer confidence survey revealed CCI decreased to 142.26 points in July from 143.99 points in May.

CCI is made up of expected economic conditions (EEC) index – which measures households’ expectations of economic conditions in the next six months – and the current economic conditions (CEC) index that captures households’ current economic conditions relative to the last six months.

The importance of the SBP-IBA survey can be gauged from the fact that the central bank’s latest monetary policy statement released on July 19 mentioned the CCI as one of the reasons for keeping the policy rate flat at 10%.

Both sub-indices of CCI registered a decline in July, with the EEC decreasing more substantially than the CEC.

Importantly, the survey revealed that relative to the preceding edition, households are expecting an increase in inflationary pressures over the next six months.

For example, the percentage of households expecting an overall rise in prices over the next six months in July stood at 49.04% as opposed to 44.26% in May.

The percentage of households expecting a rise in prices of energy over the next six months in July clocked up at 46.68% as opposed to 42.63% in May.

The average Consumer Price Index (CPI) inflation in 2013-14 remained 8.6%. It makes 2013-14 the second consecutive year in which CPI clocked up in single digits.

According to the latest quarterly report by the SBP on the state of the economy, the central bank expects the CPI to remain 7.5%-8.5% in 2014-15.

The SBP had increased the policy rate by a cumulative 100 basis points in two stages of 50 basis points each during the first half of 2013-14 in order to contain inflation in single digit. It has kept the rate unchanged at 10% since then.

The survey also revealed that 18.58% of more than 1,800 surveyed households were ‘positive’ about their ‘income a year later’ as opposed to 22.98% in May. The response of 5.19% households was positive when asked about buying durable items in the next six months compared to 7.46% in May.

Similarly, the percentage of households expressing interest in buying a car or a house in the next six months has also decreased notably in July over May.

About 5.86% households surveyed in July were ‘positive’ on the question of unemployment as opposed to 6.81% in May, reflecting the overall slide in the respondents’ expectation with regard to joblessness in the country over the next six months.

Published in The Express Tribune, July 24th,  2014.

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COMMENTS (1)

sterry | 6 years ago | Reply

Weird that consumers are pessimistic whereas global analysts and investment firms are optimistic. This shows that the media is creating a negative perception in Pakistan but international observers see the bigger picture which they like - meaning the new economic plans and infrastructure projects.

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