No more confidence in economy

  • Survey reveals that over 1,800 households think negative of economic conditions ahead


With the stocks and money markets braving fresh blows on a daily basis and Foreign Direct Investment (FDI) shrunk by 80 percent during the month of July, the consumers’ confidence in the politically-troubled country’s economic conditions is also shaking.

Likewise, the hundreds of households surveyed came up with a negative view of the consumer-related economic indicators, prominently, the ever present inflationary pressures and unemployment during the next six months.

The Consumer Confidence Index (CCI), which is jointly conducted by the State Bank of Pakistan (SBP) and the Institute of Business Administration under the head of Consumer Confidence Survey (CCS) after every two months, has declined to 142.26 percent from 143.99 percent of the preceding couple of months.

The CCI is made up of two sub indices: Expected Economic Conditions (EEC) index and Current Economic Conditions (CEC) index.

“The CCI showed some decline after consecutive improvement since January 2014,” observed the surveyors.

The 1.73 percent contraction was recorded in CCI in early last month, between July 1st and 6th, when the politically-ambitious leadership of Pakistan Tehreek-i-Insaf (PTI) and Pakistan Awami Tehreek (PAT) was bracing for taking to the streets of Islamabad in the name of “Azadi” (independence) and “Inquilab” (revolution) marches.

The supporters of the two parties since August 14 have staged separate sit-ins in the federal capital’s Red Zone rendering regular blows to the country’s fragile economy. Official data show that the flow of FDI into Pakistan slid by $ 95 million to stand at $ 24 million in July, first month of FY 2014-15, compared to $ 119 million the dollar-hungry country had attracted in the same month last year.

Similarly, the otherwise strengthening Pak Rupee has lost more than Rs 4 to the US dollar to trade at Rs 103 in recent days. The benchmark KSE 100-share index at the sentiments-driven equity market witnessed a record slump of more than 1,300 points on Aug 11, when PAT had declared to join PTI’s march on Islamabad.

The SBP and IBA, in their stratified random telephone survey (CCS) of more than 1,800 households from across Pakistan, found that the CEC index had slid to 150.74 percent from 151.39 percent. Under CEC, the surveyors capture the households’ current economic conditions relative to the last six months.

Unclear about what would come next thanks to the politically charged atmosphere in the country, the households even early last month were expecting the country’s economic conditions to deteriorate during the months to come.

This negative view was reflected in the decline of EEC index, which covers the households’ expectations of economic conditions in the next six months, to 134.85 percent from the previous 137.52 percent.

“For the month of July 2014, both these sub indices registered decline,” the survey said.

However, it added, the decline in CEC index was “marginal” in the current survey. Whereas the EEC index showed a “considerable” decrease that lead to overall decline of the CCI, the survey said.

An increasing number of consumers thought negatively of other economic indicators concerning them. For example, 49.04 percent (in July) compared to 44.26 percent (in May) of the consumers surveyed apprehended that the overall inflation would shoot up in coming six months.

“Relative to the previous survey, households are expecting an increase in inflationary pressures over the next six months (in general), also reflected in food, energy and other items of daily use,” said the surveyors.