Domestic consumption moderated in Jul-23 at the sharpest pace in nearly 1-1/2 years, as measured by QuantEco Research’s proprietary TRUCE index

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Sep 26, 2023

QuantEco Research || TRUCE Index - Consumption gives way in Jul-23, inflation pinches hard

Urban consumption index slipped to 0.60 from 0.68 in Jun-23, to mark the second consecutive monthly decline albeit at a sharper pace this time. Rural consumption index too eased from 0.65 in Jun-23 to a 5-month low of 0.55 in Jul-23. The Jul-23 consumption slowdown is seen to be driven primarily by the spike in retail CPI inflation, alongside moderation in personal loans, agri credit offtake and tractor sales. the extent of recent correction in consumption could reverse partially in Q3 FY24. The moderation in inflation over Aug-23 and Sep-23 with normalisation of vegetable prices getting internalised by households, should spur festive season demand possibly over months of Oct-Nov-23. We remain more sanguine on rural consumption (despite less than normal monsoon) vis-à-vis urban consumption amidst continuing fiscal support directed towards agri/rural sectors ahead of key state and national elections.