Recession and Consumer Spending

Recession has hit the consumer spending hard – but the worst hit segments are passenger cars/two-wheelers and airlines.

As far as consumer durables are concerned, overall production for categories such as washing machines, refrigerators and televisions grew 7 per cent in 2008, based on numbers captured in the Index of Industrial Production.

Trend:

  • The FMCG market grew at record levels of 18 and 25 per cent in the last two quarters of 2008.
  • Listed retailers selling apparel, accessories and electronics saw sales growth down to 15 per cent in the December quarter, from 61 per cent two quarters earlier.
  • In entertainment too, multiplex crowds have diminished and leisure trips are reducing
  • Sales of higher-end shampoos and fruit juices are not yet affected.

A few factors may explain this divergence…

One, rural demand has boosted by good farm produce, rising minimum support prices, and rural infrastructure development. A tendency to save in post-office schemes or fixed deposits protected wealth from falling stock markets. Sales growth in electric fans, television sets and aspirational FMCGs, such as health drinks, personal care and hair products may be attributed to demand outside urban centres. The rural economy is yet to be hit by the slowdown, and demand from this side may prove resilient for a while.

Two, the essential nature of groceries and FMCGs means that these areas may not see a slowdown, and spends on wellness, nutrition and food may continue, though already suspected ‘downtrading’ — foregoing purchase of a premium brand in favour of a cheaper one — may increase. – source

What’s your opinion on consumer spend? We earlier asked what is that consumers will pay for?, and a recent MasterCard Worldwide survey indicates that the Indian consumers’ spending priorities over the next twelve months would be towards children’s education, property purchases or renovations and wellness, in that order.

Also Read: Recession – Crisis or Opportunity? | Recession & Impact on Media | India layoffs

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