1. Introduction

The Reserve Bank has been conducting Consumer Confidence Survey (CCS) of households on a quarterly basis since June 2010. The survey captures qualitative responses on questions pertaining to economic conditions, household circumstances, income, spending, prices, employment prospects, etc. The responses are analysed in two parts, viz., current situation as compared with a year ago and expectations for a year ahead. The quarterly survey results of CCS are released along with the quarterly Macroeconomic and Monetary Developments on the RBI website. This article presents analysis of survey results covering a longer time period, with particular focus on the last four (Q2:2012-13 to Q1:2013-14) rounds of the survey.

2. Sample Coverage and Survey Questionnaire

The survey was conducted in six metropolitan cities, viz., Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi. Each city was divided into three major areas and each major area was further divided into three sub-areas. From each sub-area, about 100 respondents were selected randomly. In each round of survey, 5,400 respondents were selected (900 respondents from each city).

The survey schedule is organised into four blocks covering the respondent’s details (Block 1), economic conditions (Block 2), household circumstances and the general views (Block 3) and perception on price level (Block 4). From Q2:2012-13 (10th round) onwards, the survey schedule was modified to include perceptions on future household circumstances, outlay for major expenditures viz., motor vehicle, house, consumer durables, etc., current employment scenario and current/future rate of price increase. Qualitative information is obtained on a three point scale i.e., positive/no change/negative.

3. Survey Results

The survey results are shown for each category based on net response (difference between positive and negative perceptions). For reporting purpose, current is used for current situation as compared with one year ago and future is used for future situation of one year ahead period.

3.1 Economic Conditions

The net response on current economic conditions declined to negative zone since Q2:2012-13 round (Chart 1).

The optimism regarding future economic conditions has been consistently higher than that pertaining to the current economic conditions (Table 1). However, the net responses in case of future economic conditions have also turned negative in the latest two rounds of the survey. The net responses of both current and future economic conditions appear to show some improvement in Q1:2013-14.

3.2 Household Circumstances

Net response on current household circumstances showed a declining trend since Q3:2011-12 round. It is observed that the outlook on household circumstances has been better than the current scenario (Chart 2).

On the other hand, in terms of the net response, respondents expecting improvement in future household circumstances in the next one year, went up to nearly 28 per cent after remaining at about 22-23 per cent in the earlier three rounds. The net response on current household circumstances has consistently declined during the last four quarters mainly reflecting rise in the relative proportion of negative perceptions (Table 2).

‘Salary and business income’ and ‘prices’ are the two major factors that have influenced the respondents’ perceptions on household circumstances across all the survey rounds (Table 3).

3.3 Income

The net response on current income perceptions was at its lowest across the survey rounds and has remained consistently lower as compared to the net perceptions on future income. The optimism regarding increase in income one-year ahead improved significantly in the latest round in Q1:2013-14; although the net response at 50 per cent remained well below the peak of 67.5 per cent in Q3: 2010-11 (Chart 3).

The proportion of respondents, who reported relatively higher income as compared to the last year, has declined consistently from 52 per cent in Q3:2012- 13 to about 45 per cent in Q1:2013-14. However, this proportion in respect of future income expectations has remained above 50 per cent during last four quarters. About 30-40 per cent respondents reported that their income has remained at the same level as that of last year or would remain the same next year also (Table 4).

3.4 Spending

The net response on future spending has remained consistently lower as compared to net response on current spending. The net responses on current as well as future spending appear to show some improvement in Q1:2013-14 (Chart 4).

More than three-fourths of the respondents reported that their current spending has increased as compared to a year ago (Table 5). However, this proportion in respect of increased future spending in the next year has been significantly lower.

Among the factors that have influenced the perceptions on current spending, ‘cost of consumer goods’, ‘cost of services’ and ‘income’ were observed to be the major factors (Table 6).

3.5 Perceptions on Price Levels and Inflation

Net responses of current price level are more than 90 per cent during last one year. These proportions were marginally lower in respect of net responses on future price levels (Chart 5).

Extending the query, the respondents among those who reported increase in price levels were asked whether the rate of price rise (i.e., inflation) would be higher or same or lower. In terms of net responses, about 90 per cent of respondents perceived higher current inflation whereas expectations for higher future inflation were marginally lower (Chart 6 and Table 8).

3.6 Cross Tabulations on Income vs. Spending and Inflation vs. Spending

The cross tabulation on income and spending for last four rounds are given in Table 9. About 41-47 per cent of respondents reported increase in current spending to be associated with increase in current income. About 32-42 per cent of respondents reported increase in current spending even with current income remaining same or lower. The strength of association of expected increase in future spending with increase in future income is observed to be relatively lower as about 30-39 per cent respondents reported increase in expected spending to be associated with increase in future income.

The cross tabulation on inflation and spending for last four rounds are given in Table 10 providing further insights on spending perceptions. The analyses of responses reveal that about 73-77 per cent of the respondents reported higher current spending in association with higher current inflation. However, the association between the expected spending with expected inflation were relatively lower as 45-52 per cent respondents reported association of increase in future spending with increase in expected inflation.

3.7 Perceptions on other Macroeconomic Indicators

3.7.1 Interest rate: About 68-73 per cent of respondents perceived interest rates are ‘high’ from borrowers’ points of view while about 66-78 per cent of respondents felt interest rates are ‘low’ from depositor’s points of view during Q2:2012-13 to Q1:2013-14 (Table 11).

3.7.2 Employment: In general, the respondents had more optimistic outlook regarding employment. The similar pattern is observed in terms of net responses on employment perceptions (Chart 7).

The proportion of respondents expecting improvement in the future employment scenario has consistently been higher than those who felt improvement in current employment prospects. 42-51 per cent of respondents expected improvement in the future employment scenario whereas about one third of the respondents felt that it will remain the same (Table 12).

3.7.3 Plan for major expenses: Respondents were asked whether it is a good time to make major outlay for any major purchases viz., motor vehicle, house or durable goods. Gold/bullion was added as an item in the list from Q4:2012-13. During the last four rounds, less than 20 per cent of respondents affirmed that they have made outlays for major purchases viz., motor vehicle, house and durable goods. More than one fifth of the respondents reported that it is a good time for purchasing gold, whereas about 61-73 per cent of respondents clearly stated that it is not a good time for any major expenditure (Table 13).

3.8 Consumer Confidence Index

3.8.1 Current Situation Index and Future Expectations Index

In the pre-Q2:2012-13 rounds, the Current Situation Index (CSI) was based on the net responses in respect of economic conditions, household circumstances, income, spending and price levels and Future Expectations Index (FEI) was based on the net responses in respect of economic conditions, income, spending, employment conditions and price levels. From Q2:2012-13, these indices have been worked out using the common set of parameters viz., economic conditions, household circumstances, income, spending, employment conditions and price levels (new methodology in Annex 2).

The consumer confidence has remained subdued in terms of CSI remaining at 101.7 in last two rounds which is the lowest in the history of survey. On the other hand, future expectations shows improvement as FEI moved to 109.8 in Q1:2013-14 from 103.9 in previous quarter which was the lowest FEI (Chart 8 and Table 14). Consumers generally exhibit optimism for future (FEI) as compared to current situation (CSI).

3.8.2 Robustness of Estimates

In order to evaluate the quality of estimates, the confidence intervals for mean CSI and FEI have been estimated using bootstrap methodology. Based on 10,000 re-samples selected through ‘simple random sampling with replacement’, the 99 per cent bootstrap confidence intervals for mean CSI and mean FEI are given in Table 15. The width of confidence intervals varied between 2.84 to 3.27 indicating robustness of the estimates of CSI and FEI.

Annex 1-Data Tables

Annex 2: Methodology
Current Situation Index (CSI) and Future Expectations Index (FEI)

In standard opinion surveys, respondents generally have three reply options such as up/same/down; or above-normal/normal / below-normal; or increase / remain-same/decrease. Because of the difficulty of interpreting all three percentages, the survey results are normally converted into a single quantitative number. One of the most common way of doing this is to use ‘Net-Responses’ (also called ‘Balances’ or ‘Net Balances’). It is defined as the percentage of the respondents reporting a decrease (negative), subtracted from the percentage reporting an increase (positive). Net Responses can take values from –100 to +100. In this survey, Net Response is used to analyse the Consumer Confidence Survey results. To combine the consumer confidence perceptions on various parameters, two indices are worked out. These are Current Situation Index for reflecting current situation as compared to one year ago and Future Expectations Index to reflect the expectations one year ahead. For calculating the index, the following formula has been used:

Overall Index = 100 + Average (Net Response of selected factors)

Where Net Response = Positive perceptions (per cent) – Negative perception (per cent)

The average net responses on the current perception on various factors, viz., economic conditions, household circumstances, income, spending, price level and employment@ are used for the calculation of the Current Situation Index.

The average net responses on the future perceptions on various factors, viz., economic conditions, household circumstances @@, income, spending , price level and employment are used for the calculation of the Future Expectations Index.

@ & @@ : Current employment perception and future household perception have been captured from September 2012. These have been included for calculating CSI and FEI from September 2012, onwards.

* Prepared in the Department of Statistics and Information Management, New Delhi. The survey results are those of the respondents and are not necessarily shared by the Reserve Bank of India. The latest round (June 2013) of the survey data was released on July 29, 2013 along with Macroeconomic and Monetary Developments on the RBI Website. The previous article on the subject, along with survey schedule was published in November 2012 issue of the RBI Bulletin.