At a time when concrete signs of a revival in private capex cycle are yet to emerge, this is worrying. However, it is important to understand the factors underpinning the consumption slowdown for its proper diagnosis.
In Q2 of 2024-25, the sales growth of top 10 fast-moving consumer goods (FMCG) companies by market capitalisation slowed to 4.3 per cent from 6.1 per cent in the previous quarter, raising serious concerns about weakening urban consumption. This was later confirmed by a slowdown in private final consumption expenditure (PFCE), which grew by 6 per cent in Q2 of 2024-25, compared to 7.4 per cent in the previous quarter.
The slowdown in private consumption has been underway for some time now. It started eight quarters ago in Q3 of 2022-23 when year-on-year (y-o-y) growth in PFCE dropped to 1.8 per cent. The average PFCE growth moderated to 4.1 per cent over the eight quarters from Q3 of 2022-23 to Q2 of 2024-25, a sharp decline from the robust average growth of 10.5 per cent in the preceding eight quarters (Q3 of 2020-21 to Q2 of 2022-23), and the pre-pandemic average growth rate of 6.7 per cent (Q1 of 2012-13 to Q4 of 2019-20). A combination of factors contributed simultaneously to this slowdown in private consumption.
This story is from the December 25, 2024 edition of Business Standard.
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This story is from the December 25, 2024 edition of Business Standard.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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