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Urban consumption grew 9.8% YoY in 3QFY24, the highest in five quarters and compared to 6.9% YoY growth in the previous quarter, as per a report by Motilal Oswal Financial Services.

This is mainly led by continued robustness in PV sales (five-quarter high, average growth of 19% in the last five quarters); personal credit (average growth of 13% in the last five quarters) and real salary & wage bill of BSE500 companies (10.5% in 3QFY24 vs. 8.7% in 2QFY24). Additionally, both nonfarm consumer imports and IIP of consumer durable goods posted a six-quarter high growth in 3QFY24.

The report said that overall, it is clear that rural spending, especially the agricultural sector, remained weak in 3QFY24. This was the eleventh consecutive quarter when the urban sector growth outpaced the rural sector.

Despite rural spending declining for the second successive quarter at the highest pace in 18 quarters, it is very likely that personal consumption expenditure (PCE) growth accelerated toward 4.5% YoY in 3QFY24 (up from 3.1% YoY in 2QFY24). This growth surge is predominantly driven by the urban sector, which saw its highest growth in five quarters, the report said.

A simple average of 12 proxy indicators suggests that rural spending declined for the second successive quarter in 3QFY24, the worst in 18 quarters. Rural spending contracted 1.9% YoY in 3QFY24 versus a contraction of 0.5% in 2QFY24 and a growth of 4.8% in 3QFY23. This was mainly led by a sharp contraction in fiscal real rural spending (down 30.6% YoY in 3QFY24, the first contraction in six quarters), continuous deterioration in reservoir levels, farm exports and tractor sales, along with muted rural wage growth. They outpaced improvements in two-wheeler sales, farm terms of trade, fertilizer availability, and real credit to the agricultural sector, the report said.