Despite
the fact that Indian consumers’ spending or intentions to spend did not get
impacted by demonetisation in Q3, 2016-17; a come off has been seen in January
2017. Orbis Economics’s proprietary measure –the Consumer Conditions Measure
(CCM) - slowed down to 101.4 in January 2017, the slowest in five months.
A
level for the CCM that is above 100 indicates improved consumer conditions from
the average conditions during the last year and vice-versa. The level of 100
indicates unchanged conditions. With the CCM coming in above 100 during January
2017 as well, the environment has been more conducive to consumer spending
consecutively for the last 5 months, and for 6 of the last 10 months for which
2016-17 data is available.
The CCM is a good leading
indicator for overall economic Private Final Consumption Expenditure (PFCE) in
the economy, which was starkly evident from the Q3, 2016-17 numbers. Despite
the fact that there had been a hit to consumer spending in the quarter due to
demonetisation, the CCM had shown a spike. This was further corroborated by the
sharp increase in PFCE growth to over 10% during the quarter. Clearly, the
boost to spending on account of festive demand more than made up for the hit
due to demonetisation. A strong agricultural season pushed up rural demand,
which undoubtedly led to the strong consumption spending showing.
However,
lagged impacts of the policy measure cannot be discounted. This is evident from
the come off in January 2017 numbers. For now, though, is the fact that we need
to wait and watch for two months’ data to fully know where consumer spending is
going.
The CCM is a blended measure
from a number of consumer related indicators, which suggest the consumers’
intentions to purchase, actual purchases as well as price conditions. At
present the we are running the beta measure of the CCM.
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