NationalVOLUME 15 ISSUE # 06

Consumer confidence on the wane

The latest consumer confidence survey of the State Bank of Pakistan (SBP) shows that there has been a modest improvement in consumer confidence and household sentiments.
According to the SBP report, consumer confidence scaled up to 44.2 index points in September from 43.3 two months ago. The Consumer Confidence Survey (CCS) is a telephonic survey of 1,600 households that are selected randomly across the country. While releasing the survey findings, the SBP website says that the surveys reflect the opinions of households and should not be considered as the SBP views. Interestingly, the latest CCS got a mention in the most recent monetary policy statement which said it was “indicative of modestly better economic outlook of the public”.
But there is a contrary point of view. Most marketing professionals, business leaders and trader representatives contest the SBP survey findings. They quote anecdotal evidence to prove that the collective depression is growing deeper and there seems to be no stopping in the steady fall in consumer confidence for the time-being. In their view, the Pakistani consumer is losing hope. Job uncertainty and a fear of wage freeze/pay-cut amidst the rising cost of living have overwhelmed the country’s teeming millions. The changing consumer behaviour has created a sense of uncertainty in the market. The trend has not spared even high-end fashion brands and eateries.
According to some analysts, the will and confidence of Pakistani consumers seems to be weakening. Previously, people who would go to the market undeterred by terrorist attacks, are now reluctant to go to bazaars because of high prices. They are not frequenting markets with the same seal as before. Rising inflation and unemployment have substantially reduced the real disposable incomes. The final blow is dealt by a gloomy future economic outlook as portrayed in various reports by international financial institutions, such as the World Bank and the Asian Development Bank.
Media reports say that the consumer market is under severe stress. Sales data of popular consumer products companies indicate that people are rebalancing their monthly spending habits. Instead of stocking kitchen and hygiene products for a month, people now prefer to shop for a week, switching from big to small packs and from pricier to cheaper brands. In extreme cases, they are going for the cheapest varieties without nametags. Average Pakistanis have high lifestyle aspirations, but without money their wishes remain unfulfilled.
On the other hand, the government is too obsessed with raising revenue to care about people or their needs. Firsthand reports confirm that the slide in the market is getting more pronounced by the day. Businesses are down and companies are behind their last year’s sales targets. On average, the food business is down by 20 per cent and fashion and lifestyle by as much as 30pc. People are closing down their outlets. This is generating negative vibes in business circles, leading to rising joblessness.
According to a report, many big western fashion brands are in the process of winding up their operations in Pakistan. This is because changes in the tariff regime have rendered the business of foreign brands unviable. The falling sales volumes and higher tariffs have squeezed margins. According to market analysts, this acts as a deterrent to potential foreign investment.
But some businesses are thriving. For example, the business of prepared frozen food is said to be expanding at an accelerated pace despite everything. Knowledgeable circles say that there is double-digit growth in the processed food segment annually. People are scaling up and there is a regular influx of new players. One viewpoint is that society has accepted the change. For some time, consumers were reluctant. But now they are back. Otherwise, some big departmental local chains wouldn’t have been expanding their networks. Foreign retail chains are also entering the country.
Some experts blame the media for hurting consumer and business sentiments. Both conventional and social media are distorting facts and send negative signals to the people.
According to them, consumer behaviour is undergoing a change. Since there are now more choices in the market, they take time deciding about their shopping options. No doubt, at present we are facing a slowdown, and in such a situation the disposable income falls, which affects the general buying power. But consumer confidence has not suffered any serious setback.
There are two different points of view which are being presented from their respective perspectives. But for the neutral observer what counts is the situation on the ground against which there is general outcry from the public.