Muted Growth Forecast for Consumer Goods Sector Amid Urban Slowdown

Mirae Asset Sharekhan projects flat consumer goods growth in late 2024, citing urban demand stagnation and moderate rural recovery amid inflation and job scarcity. International revenues face currency challenges, while profits are pressured by high costs and subdued margins. Rural growth is poised to outpace urban, bolstered by a strong monsoon.

In a recent analysis by Mirae Asset Sharekhan, the consumer goods sector is expected to face another quarter of limited growth from October to December 2024 due to tepid urban demand coupled with a slow recovery in rural areas. The recently concluded quarter had already seen stagnant urban consumption, attributed to high inflation and minimal job opportunities, while rural growth managed to surpass urban figures.

The report highlights that international business revenue growth might remain moderate owing to currency depreciation challenges. Moreover, revenue forecasts for tracked companies suggest a modest 6% year-on-year growth, predominantly driven by price increases, while volume growth may only reach low single digits.

Projected profits for the consumer goods sector are less optimistic, with an expected 7% year-on-year decrease in profit after tax. This decline is due to poor revenue growth and shrinking margins, compounded by high input costs and increased advertising spending. With rural growth trends poised to persist, the forecast indicates sluggish overall demand but expects better agricultural output due to a favorable monsoon, which could stabilize agri-inflation.

In financial services, sluggish growth persists, with NBFCs witnessing moderated loan growth and inconsistent net interest margins. The sector, grappling with elevated credit costs, notices restrained loan advancements in unsecured personal and MFI loans, while commercial vehicle demand remains weak. Contrarily, sales of passenger vehicles, tractors, and used vehicles are on the rise.

Despite regulatory shifts, the insurance sector anticipates healthy annual premium equivalent (APE) growth within its portfolio, reflecting resilience amid challenging economic conditions.

(With inputs from agencies.)