Consumer spending remains muted, spending on essential items grew by only 3% in May, report shows

Continuing with the trend of subdued demand for consumer goods items, sales growth at retail level during the month of May remained muted. A latest survey by the Retailers Association of India (RAI) shows, despite CPI inflation rate coming down in recent months, consumers are yet to open up their purse strings. As prices of all key items and commodities continue to trade closer to the record high levels, impacting household budgets, mass market consumers restricted their purchases to essential items during the month.

As per RAI, sales growth of consumer items at the retail level stood at meagre 3% year-on-year. Among the key regions of the country, South India led the growth with 4% yoy growth in sales, while West and East regions reported 3% growth. However, it was the North India region – largest in terms of market size for most consumer goods categories – where the growth rate was slowest – at 2%.

Among the product categories, consumer durables and food & grocery led the pack. As a harsh summer forced consumers to purchase air conditioners and air coolers, higher sales of such items pushed up its growth rate to 6%. While, steep food inflation led them to spend more on such items. Food inflation , in fact, remained above 8.5% levels for the fourth consecutive month in May.

According to Kamal Nandi, Executive Vice President at Godrej Appliances, sales of air conditioners are up by 30% this summers due to the constant heatwave conditions prevailing across North and West India. While, sales of refrigerators have also picked up as demand for mass market categories is finally coming back.

Non-essential items, however, took a beating. Sales of sports goods, jewellery, apparel & clothing recorded a meagre 1% yoy rise. While sales at quick service restaurants grew 5%, and for beauty & personal care items by 3% over the same month last year.

“Retailers saw a 3% growth in May 2024 compared to the same period last year. While consumer spending on non-essential items remains cautious, categories such as food, grocery, and consumer durables have shown positive growth trajectory. Retailers are looking forward to business post-election season. Budget in July will hopefully provide much-needed incentives to bolster consumer confidence and support further growth in the retail sector,” says Kumar Rajagopalan, CEO, RAI.