Monetary Policy: Consumer Confidence Weakens, Capacity Utilisation Declines, Show RBI Surveys
Consumer confidence weakened further on pricing and employment worries amid weak demand and falling capacity utilisation.
Sentiment dropped in September as Indians feel less optimistic about the present economic situation and have lower expectations for the year ahead, showed the Reserve Bank of India's survey. The current situation index was at its lowest since May 2018 while the future expectations index dropped to the lowest since November 2017.
Weakening consumer confidence has led to a slump in consumption and, along with stagnating capex, dragged down GDP growth to a six-year low in the first quarter ended June.
Price levels and employment were largely responsible for the weakening sentiment, according to the survey. It showed tepid consumption demand, especially relating to non-essential items, the Monetary Policy Committee noted while opting for a 25-basis-point cut in the repo rate.
Capacity utilisation declined to 73.6 percent in quarter ended June from 76.1 percent in the preceding three-month period, according to the RBI's Order Books, Inventories and Capacity Utilisation Survey that covers 818 manufacturers and provides a snapshot of demand. Seasonally adjusted capacity utilisation, however, increased by 0.3 percentage points to 74.8 percent.
Fewer new orders were received during the period, marking the third successive quarter of decline.
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