RBI survey: Weak sentiment among consumers, say analysts

MUMBAI: A sharp deterioration in consumer sentiment alongside downgraded growth forecasts, rising inflation expectations and a weakening rupee has signalled a broad-based macroeconomic slowdown, according to the Reserve Bank's May 2026 survey rounds, with both households and professional forecasters turning more cautious over the near-term outlook.

Data from the May 2026 rounds of the Urban Consumer Confidence Survey and the 100th Survey of Professional Forecasters showed a clear shift towards pessimism over a two-month period from March to May, as inflationary pressures, currency depreciation and softer demand weighed on expectations.

Urban consumer sentiment weakened further, with the current situation index falling to 90.7 in May from 95.7 in March, marking the third consecutive decline and keeping the index firmly below the 100 threshold that separates optimism from pessimism. The future expectations index also slipped to 118.7 from 120.2, its lowest level since Sept 2023.

According to the survey covering 6,086 respondents across 19 cities, households reported worsening perceptions across key indicators. The net response on the general economic situation deteriorated to minus 16.5 from minus 8.6 in March, while one-year-ahead expectations declined to 19.5. Employment conditions also weakened, with current perceptions falling to minus 14.4 from minus 9.1, and future expectations easing to 21.8 from 25.2.

Price pressures remained acute. Around 91.6% of respondents said prices had increased over the past year. Income growth showed signs of stagnation, with the net response on current income falling to 0.9 from 3.0, while overall spending sentiment moderated to 74.0 from 78.4.

The decline in spending was driven by pulled back discretionary consumption, as non-essential spending perceptions turned negative at minus 0.8 from 0.8 in March, even as essential spending remained relatively stable.

Professional forecasters mirrored this caution, lowering growth projections and revising macroeconomic assumptions in the 100th survey round. Real GDP growth for 2026-27 was revised down to 6.5% from 6.9%.

The most pronounced revision was the 60 basis point reduction in capital formation indicating that firms may slow expansion plans amid rising costs and uncertain demand.