Unemployment Rate: Recovery of consumer sentiments maybe impacted by inflation and unemployment: CMIE

As per CMIE, the index of consumer sentiments (ICS) rose by 3% during April, a tad slower growth than the monthly increases of the recent past. The index had risen by 4% in January, 5% in February and 3.7% in March.

“It is good to see a steady improvement in consumer sentiments month after month, but it is somewhat disquieting that the rate of improvement has been rather small and that it is getting smaller,” CMIE said in its weekly labour market analysis.

According to CMIE, rising inflation, creeping borrowing rates and elevated unemployment rates are weighing on household sentiments and their confidence in the economy.

The CMIE survey shows only 11.2% people believe the economy will do better over the next year and only 11.6% believe it will do consistently well during the next five years.

“It could be that the fear of rising inflation, interest rates and unemployment rates is gnawing their confidence in the Indian economy,” it said.

CMIE further said along with improvement in sentiments, even household incomes have improved and this is expected to translate into greater propensity to spend which wasn’t the case till recently.

“April 2022 finally changed this. The proportion of households who considered this to be a better time to buy consumer durables increased from 10.5% in March 2022 to 12.2% in April 2022. This change in mood is important in strengthening the recovery process,” it said.

CMIE, however, cautioned that with the Russia-Ukraine war keeping commodity prices high, the central banks will react to the prospects of higher inflation in the coming months.

“The expectation is that inflation will remain high and interest rates will rise and employment growth will remain muted. It is likely therefore that growth in consumer sentiments may be restricted to the current low single-digit levels,” it added.