The latest Consumer Confidence Index (CCI) survey by Institut Public de Sondage d’Opinion Secteur (IPSOS), a leading French multinational market research firm, highlights a modest yet noteworthy shift in Pakistan’s economic sentiment for Q2 2024. The report reveals a +0.8 point increase in the overall CCI. Key sub-indices performance show improvements in the Current Index (+1.4 to 18.7), Expectations Index (+0.7 to 44.3), and Investment Index (+1.1 to 19.6). However, the Jobs Index declined, dropping by 2.9 points to 47.0.
Pakistan’s CCI stands at 32.3, noticeably trailing the global average of 49.1. This position highlights a significant gap when compared with other emerging economies. For instance, Brazil’s CCI is at 53.3, China’s soars to 80.4, South Africa’s is 44.1, Turkey’s hits 36.8, and India has a robust 67.0. These figures underscore the challenges faced by Pakistan in bolstering consumer confidence amidst its economic landscape.
The CCI in Pakistan depicts a roller-coaster journey from 2012 to 2024. The CCI in Pakistan peaked at over 50 score points in September 2018, well above the global average, indicating strong economic optimism fueled by favourable conditions and political stability. However, post-2018, it nosedived, exacerbated by the COVID-19 pandemic. The current level in 2024, around 32-35, reflects ongoing challenges such as high inflation and unemployment. The CCI remained volatile despite sporadic recoveries, underscoring persistent economic challenges and political instability.
Consumer confidence in Pakistan remains low due to a complex mix of economic, political, and governance challenges, further exacerbated by external factors and regional dynamics. Persistent economic woes, such as high inflation, rising unemployment, and a depreciating currency, undermine purchasing power and fuel future uncertainty. Additionally, inconsistent government policies on taxation, subsidies, and business regulations add to the uncertainty, discouraging consumer spending.
Frequent political upheavals disrupt economic policies, creating an unpredictable environment for consumers and investors. This volatility is compounded by external factors like fluctuating oil prices and global economic downturns. Additionally, ongoing security issues and regional conflicts deter investment and severely limit economic opportunities. These combined factors create uncertainty and caution, stalling economic growth and undermining consumer confidence.
Diminished consumer confidence breeds pessimistic sentiments, impacting businesses, investors, policy formation, and overall economic health. The ripple effects of such sentiment shape investment decisions, influence business strategies, and challenge the effectiveness of economic policies, ultimately weakening the economic foundation.
For instance, low consumer confidence severely impacts aggregate consumption expenditures and Gross Domestic Product (GDP). When confidence wanes, consumers cut back on non-essential spending, particularly on big-ticket items, due to economic uncertainty. This cautious spending leads to lower sales, decreased revenue, and potential business job cuts.
Since consumer spending is a significant GDP component– a substantial 83 percent– its decline can slow economic growth or trigger a recession. Persistent low confidence leads to prolonged economic stagnation, diminishing investments, and lower tax revenues, further straining public finances. This financial pressure limits the government’s ability to effectively stimulate the economy, creating a challenging environment for recovery and growth.
In Pakistan, low consumer confidence makes businesses hesitate to invest, anticipating reduced demand. This cautious approach stalls innovation and curtails job creation as firms cut costs to manage expected revenue shortfalls. Consequently, unemployment rises, creating a vicious cycle where increased joblessness further erodes consumer confidence and spending. The resulting economic stagnation highlights the crucial link between consumer sentiment and overall economic health.
Stock market volatility increases as lower consumer confidence leads to declines, with investors growing cautious about future earnings and economic stability. This financial unease often spills into the social sphere, where economic challenges can ignite social unrest and political instability. Public dissatisfaction manifests in protests and demands for government intervention, further complicating the economic landscape and highlighting the delicate interplay between consumer sentiment and broader societal dynamics.
To elevate consumer confidence in Pakistan, the government should focus on achieving economic stability by controlling inflation, stabilizing the currency, and reducing unemployment through consistent policies. Transparent governance and ensuring political stability can further build trust. Effective communication of government actions and economic plans will help build public trust. Investments in infrastructure will support economic activities, create jobs, and boost consumer sentiment. Enhancing national security to mitigate regional conflicts and domestic security issues will encourage spending and investment. Moreover, a mix of monetary and fiscal policy measures is essential in driving economic growth. This combined approach ensures a robust and resilient economic recovery.
