Insights from Peripheral Vision, October 2024

October brought notable economic shifts, with inflation rising much beyond RBI expectations. However, consumer willingness to spend increased and passenger car sales grew y-o-y and sequential basis.

• CPI inflation exceeded the RBI's 5.81% forecast, rising to 6.21%, primarily due to higher food prices along with increasing rates in the housing sector, while fuel and light slowed. WPI inflation reached 2.36% due to rise in prices of food articles, manufacture of food products, manufacture of machinery & equipment, manufacture of motor vehicles, etc.
• Consumers' willingness to spend on essential goods increased from 85.1 to 86.2, driven by both inflationary pressures and heightened demand during the festive season; non-essential spending also showed cautious improvement.
• Passenger car sales in India reached 3.98 lakh units in October 2024, marking a 1.8% growth year-on-year as festival discounts and strong demand led to increased sales in the festive month.
  

CPI Inflation in October breached the RBI expectation of 5.81% and reached 6.21%, majorly driven by rising food prices such as vegetables, oils and fats, which touched 10.87%. The housing inflation saw a rise to 2.81%, while the rates of fuel and light touched -1.6%.

WPI inflation increased to 2.36% for October 2024, driven by increase in prices of food articles, manufacture of food products, manufacture of machinery and equipment, manufacture of motor vehicles, trailers and semi-trailers, etc.

This spike in inflation will postpone the reduction in interest rates, thereby impacting consumer spending and business investments. Also, persistent high inflation will dampen consumption, impacting overall economic growth.

Consumer willingness to spend on essentials increased from 85.1 to 86.2, reflecting both inflation-driven price hikes and the demand surge during the festive month, with Diwali and Dussehra falling in the same month.

Non-essential spending sentiment improved slightly by 0.7 points, suggesting cautious optimism as consumers make selective discretionary purchases, likely boosted by seasonal festivities. This indicates a blend of caution and a temporary rise in spending due to the festivals.

According to the survey by RBI, despite increasing inflation, households expressed higher confidence in employment, income, and spending for the year ahead.

In October 2024, Indian passenger car sales reached 3.98 lakh units, marking a 1.8% year-over-year increase and a 10.9% rise from the previous month. The festive season and substantial customer discounts drove robust demand, leading to higher sales volumes. Traditionally, these festive months account for about 30-35% of annual passenger car sales. Dealers remained optimistic about meeting their targets despite some pressure on unsold inventory.

While consumers have shown a willingness to spend during the high festival season, sustained inflationary pressures and higher borrowing costs could pose challenges to future economic growth.

Check out Kanvic’s PeripheralVision, an interactive dashboard designed to help decision-makers detect weak signals and adapt strategies to stay ahead of the curve.