Phew! Or shall we say kaboom! No word truly captures the travesty this year has been—both politically and economically—and it is only headed south as policy rate stands tall at its record high, industries are critically running below capacity and inflation is loud and thunderous.

There is a ticking clock on Pakistan’s external debt repayments, pressure of which continues to amount, and there are few options available to avert a default. Traditionally strategic allies like the US have turned deaf ears as it is no longer strategic (or important) to help Pakistan out of its financial pickle while negotiations with the IMF have turned disquieting. The people are believing the growing cacophony of voices murmuring doomsday scenarios; it is really quite believable, the oft-celebrated resilience of Pakistanis notwithstanding.

Head over now to the Central Bank’s Consumer and Business Confidence surveys to appreciate just how dark it is getting. Consumer confidence in May-23 is lower than it was during Covid while Business confidence has been lower than it was during Covid since Feb-23. Consistently, for months in the case of business confidence, and for as long as can be remembered in the case of consumer confidence, both economic agents (firms and consumers) are pessimistic about current and future economic conditions of the country (markings are below 50), and they have become more and more unhappy as months have passed.

There is definitely something to be said about the quickening market pulse here and the need to put a finger on it. The SBP may have stopped documenting and publishing different datasets, but has certainly doubled down on its efforts to present the latest market sentiments by publishing both the confidence surveys every month, instead of every two months which was the practice before Dec-22. Perhaps, SBP expects business and consumer perceptions to change faster and wants to capture them more frequently.

The results are jarring and there are many, too many even, gloomy bits of information that can be extracted from the dual surveys. Inflation expectations are not as high as Feb-23 but still consistently high enough, month after month. The gap between business confidence and consumer confidence has thinned—everyone feels the same, and they all feel bad. Sure enough, businesses have been starved for imports—used for the production of goods and services—given the ongoing restrictions related to LCs, whilst grappling with rising cost of production. The supply side has been significantly hampered, especially for non-essential manufacturing. In Apr-23, Large Scale Manufacturing (LSM) contracted by higher than 21 percent, and cumulatively by 9.4 percent between Jul-Apr compared to the same period last year.

The Purchasing Managers Index (PMI) estimated under the Business Confidence Survey shows production, new order and quantity of raw material purchases over the next six months will fall. Businesses conceivably expect the LC crisis to prolong their suffering well into next year (though there was a slightly uptick in May-23 as the restrictions eased ever so slightly). But industrial fatigue demonstrated by LSM’s negative growth is incontestable. Even if there was demand despite inflation, there isn’t enough supply.

Meanwhile, consumers are worried about stagnant incomes, amid inflation and growing indirect taxes that are a hole in their shrinking pockets, all the while not very confident about keeping their jobs intact at all. In Mar-23, the answer to the question asking consumers to assess the general employability in the next six months in the country was resoundingly negative, a score of 78, the highest ever recorded in the survey, the first exercise of which was conducted in Jan-12(quick explainer here: the prepares a “diffusion index” for every question. >50 means more people expect unemployment to be high, <50 means more people expect unemployment to be low and =50 means positive and negative views are equal). Folks at home are expecting unemployment to rapidly rise.

The buying appetite of consumers has plummeted (see graph). Consumers were asked to assess whether they would spend on durable household items, cars and/or property, and the diffusion index fell to the pits, even landing below the time period during covid when nearly the entire country was shutters down. Yes, worse than that. Crucially, the survey records confidence markers for different income groups and a range of other qualifiers such as region, gender, education level and profession. Here the findings are startling. It is not just the poor who are unhappy. The rich in fact—or what passes off as rich—may be even unhappier. The survey divides respondents across three income groups: i) incomes of less than Rs50,000 ii) income ranging between Rs50,000 to Rs100,000 and iii) those with income above Rs100,000. Now certainly, these categories are very broad (likely outdated) and no way does the survey decide which income group is poor, middle class or rich, so let’s pick the third category and replace “rich” with “better-off”. We find that the consumer confidence for this group, the “better off” kind has dropped the most since this year began, more than the first and second category. This certainly gives pause. Even more surprisingly, folks earning below Rs50,000 have the highest expectations for inflation to increase and yet the lowest decline in confidence in the group. Maybe those already eating sparingly have a higher tolerance for skipping a meal or two. Some cold comfort?