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February 24, 2021

Pakistan consumer morale improves amid caution

Business

February 24, 2021

KARACHI: Consumer confidence showed improvement at the later part of the last year after reopening of the economy, nonetheless with concerns over rising inflation and unemployment, according to Dun & Bradstreet and Gallup Pakistan’s survey report.

“Current consumer confidence growth of almost 15 percent compared to the last quarter is healthy, showing signs of recovery in Pakistan but consumers were cautiously optimistic as future expectations have declined 6 percent as compared to Q3,” Nauman Lakhani, country lead of Dun & Bradstreet in Pakistan said in a statement on Tuesday. The fourth issue of Pakistan consumer confidence marks the end of the calendar year 2020. The report compares changes in consumer confidence from Q3 2020 to Q4 2020.

Consumer confidence improved in the last quarter of 2020 as consumer confidence index (CCI) remained 90.3 points, compared to 88.7 points in the previous quarter translating into 1.8 percent increase.

The Index is a reflection of ‘current situation’ (economic changes felt in the last six months), as well as ‘future expectations’ (changes expected for next 6 months) of consumers across the country. The CCI ranges from 0 to 200, with 100 as the neutral value. A score of less than 100 indicates pessimism. Perceptions about the Country’s Economy have improved consistently throughout the year, highlighting upbeat consumer sentiments. Household financial situation was the most optimistic parameter implying people’s household income seems to be rising after a decline due to COVID-19.

In contrast, rising Inflation and more importantly unemployment continues to drag consumer enthusiasm as unemployment remained the most pessimistic parameter. Despite an increase in overall optimism regarding unemployment, 3 out of 4 respondents believed that unemployment has increased in the last six months as compared to 77 percent in Q3. During Q4 survey, 93 percent consumers believed that daily essentials have continued to become expensive / very expensive in the last 6 months compared to 91 percent in Q3. On the whole, consumers across all provinces, location (urban and rural) and different age groups were relatively more optimistic for current economic situation, than they were during Q3 2020 survey.

Future expectations deteriorated for the first time since Q1 2020 due to cautious optimism by individuals because of prevailing uncertainty amid resurgence in COVID-19 cases. Moreover, the overall consumer confidence remained pessimistic throughout the year.

The index covers four key parameters: household financial situation, country’s economic condition, unemployment, and household savings. During the survey, optimism has improved for household financial situation, country’s economic situation and unemployment, while it has declined for household savings primarily due to consumers’ concerns about future household savings. This could have a cascading effect on asset related investments in the country, and overall spending by consumers.

“The main drain on the household economy is the continually felt heat of inflation and concerns about rising unemployment,” said Bilal Ijaz, executive director of Gallup Pakistan.