Wary consumers = shallow recovery

Consumers unwilling to spend are keeping the investors and industry on a leash.

The economic recovery, which began this year after a prolonged slowdown, continues to be weak as the retail and fast moving consumer goods (FMCG) segments are still subdued, finds a survey by BluFin, a consultancy.

“The shallowest recovery, certainly in the last six years, and possibly in the last 20. The consoling factor is that across the world one is witnessing similar recoveries,” said Surjit Bhalla, senior advisor, BluFin.

The November reading of BluFin’s monthly business cycle indicator suggests that 21 out of 42 indicators have improved.

Bhalla expects this number to improve by December-end.

The recovery this year is nowhere near the long-term average growth between 1991 and 2012, the firm said, adding that along with the gloomy economic scenario the weak consumption is responsible for the slack.

Even the festival season this year failed to encourage consumers to loosen their purse strings.
“This year the Diwali sales were slowest in several segments. Even in the peak season several shops were empty” said Sanjay Bindra, director at Seven East Brand, an ethnic wear brand.
Retailers said the empty stores even in the peak season gives an idea about how the rest of the year would have had been.

In the FMCG sector, all leading players recorded single-digit volume growth in the last quarter.
This is a indicator that consumers are not buying and this, in turn, is affecting recovery, experts said.

To make the matters worse, they are downtrading, or opting for cheaper products, in essential and discretionary categories.

The good news is that the survey suggests that a turnaround may be on the horizon.  “We are almost at the fag end of the slowdown and a turnaround in the consumption and investment pattern may happen in the coming six to eight months,” said Bhalla of BluFin.