Consumer confidence declines sharply on high inflation

Consumer confidence declines sharply on high inflation

KARACHI: The Consumer Confidence Index (CCI) has declined sharply to 70.8 points in the third quarter of 2021, compared to 88.0 points in the second quarter of 2021, translating into 19.6 per cent decrease.

This deterioration in sentiment is driven by weakening macroeconomic indicators, primarily increase in inflation and PKR depreciation. Consumers are perceiving these declining indicators as signals for further deterioration in their personal and economic conditions. Respondents reported a greater decline in Future Expectations (down by 22.7 per cent) compared to Current Situation (down by 14.9 per cent) in this quarter.

During the current quarter, all CCI parameters witnessed an overall decline. Consumers’ sentiments witnessed the largest deterioration in regards to Economic Condition of the Country (24.1 per cent decline) due to weakening macroeconomic indicators.

Unemployment continues to drag consumers’ enthusiasm and remained the most pessimistic parameter (NI = 54.1). Unemployment Situation deteriorated by 21.6 per cent q-o-q, 68 per cent of respondents believe that Unemployment will increase in the next six months compared to 43 per cent in Q2 2021. During Q3 2021 survey, 94 per cent consumers believed that daily essentials have continued to become expensive/very expensive in the last 6 months compared to 92 per cent in Q2 2021.

Nauman Lakhani, Country Lead of Dun & Bradstreet in Pakistan stated, “The seventh issue of Pakistan Consumer Confidence depicts a sharp decrease in CCI Q3 2021 to 70.8, after a slight recovery in Q2 2021. Recent weakening in macroeconomic indicators such as rising inflation and currency depreciation have hurt consumer expectations. All CCI parameters declined Q-o-Q which reflects increasing concerns amongst consumers.”

Bilal Ijaz Gilani, Executive Director Gallup Pakistan, added, “Consumer Confidence has taken a turn for the worse in the latest Quarterly CCI, mostly because of continued inflation in the country together with an uneven growth story emerging. Whereas the large manufacturing and export numbers are improving small traders and daily wagers economic situation has failed to pick, widening the gulf between beneficiaries and losers of the growth. Recent government moves such as PMs Relief plan of subsidizing food commodities, therefore in our assessment a right move. Whether it is enough to shore up consumer confidence, our next quarter survey would reveal.”

The CCI report has been developed by assessing Consumers’ Confidence about the economy as well as their personal financial situation. The Index covers four key parameters i.e., Household Financial Situation, Country’s Economic Condition, Unemployment, and Household Savings. The Index reflects ‘Current Situation’ (economic changes witnessed in the last six months), as well as ‘Future Expectations’ (changes expected for next six months) of consumers across the country.

The CCI ranges from 0 to 200, with 100 as the neutral value. A score of less than 100 indicates pessimism while a score of more than 100 indicates optimism.