Construction, industry and retail show significant drop in confidence

The confidence indicators of the construction and retail sectors fell further in November. Lower confidence indicators are a sign of an economic downturn.

“Confidence in the future is at a low ebb, particularly in construction. Weaker confidence indicators are a sign of an economic downturn,” Roope Ohlsbom, an economist at Suomen Yrittäjät, the Finnish SME association, says.

Now confidence has weakened in retail, too. The retail sector’s confidence indicator declined from -10.6 in October to -16.3 in November. The Confederation of Finnish Industries published the business confidence indicators on 27 November.

Construction and industry are showing the lowest confidence.

The construction sector’s confidence indicator dropped to -42.8 in November. The figure had already been extremely low in October at -41.2. In industry, the confidence indicator remained the same, at -21.

The only speck of light in the economy is services, where confidence rose slightly from -6.6 in October to -5.6 in November.

Companies’ confidence is significantly below the long-term average in all major sectors.

“The situation is already extremely challenging, not to mention if services or retail decline the way industry and construction have. Even though smaller companies try to hold on to their employees until the end, if companies continue to have low confidence, that will be reflected on the job market,” Ohlsbom says.

Consumers tightening purse strings

The consumer confidence indicator, published by Statistics Finland, was -12.4 in November. It was -12.6 in October, -11.5 in September and -8 in August.

“Consumers’ confidence is being pushed down by economic uncertainty, continued high interest rates and bad news about construction and industry,” Ohlsbom says.

Consumers’ expectations, both of the Finnish economy in a year and their own finances, are now extremely negative. Their expectations about the unemployment rate remained bleak. By contrast, consumers’ confidence in their own finances a year from now rose slightly.

Great uncertainty has increased households’ desire to save, at the expense of consumption. A recent review of the asset management sector found that households are buying into investment funds with exceptional activity.

Confidence indicators toxic for property market

Respondents considered it a particularly bad time to buy residential property, even if there was slightly more intent to buy than a month earlier.

“The property market will not revive before consumers feel significantly more confident in their own finances and job opportunities. As it stands, the European Central Bank’s monetary policy tightening will keep the brakes on the property market well into next year,” Ohlsbom says.

Are you a Suomen Yrittäjät member yet? Read more about member benefits and advantages!