Consumer confidence at lowest level in two years, companies slightly more positive

Consumer confidence fell in April to its lowest level in two years, Statistics Finland’s consumer confidence indicator shows.

The April confidence indicator was -12.5. In March the indicator was -11.5 and in February -10.5. The long-term average fell to -2.9.

“Consumer confidence has fallen to an exceptionally weak level and has in practice stalled economic growth, while the probability of recession is increasing. Confidence is currently particularly fragile and reacting more strongly than usual to risks,” says Petri Malinen, Senior Economist at Suomen Yrittäjät, the Finnish SME association.

“The threat of unemployment and worrying news both at home and abroad are keeping consumers cautious. Just as sentiment was gradually turning more positive, households’ confidence in the future is being tested from many sides.”

Consumer confidence is weighed down in particular by gloomy assessments of Finland’s economic outlook.

“Households also saw their own financial situation as markedly weaker than before, and fears about inflation at the time of the survey and price developments over the next year have intensified significantly. “Bleak expectations are being sustained in particular by the rise in the price of oil and the continued high threat of unemployment, as well as security and geopolitical tensions. Many households are continuing to prepare for bleaker times,” Malinen says.

“The recovery in confidence and private consumption risks being pushed far into the future despite the Government’s growth measures at the budgetary talks, even though consumers’ purchasing power has been strengthening for some time. A weak labour market and inflation and interest-rate fears fuelled by the Middle East crisis are keeping consumers cautious. This caution indicates consumers are preparing for an uncertain future,” Malinen notes.

Companies slightly more positive

Business cycle expectations among companies strengthened slightly in April, the business confidence indicator published by the Confederation of Finnish Industries (EK) shows.

The US and Israeli military action against Iran has pushed up energy and other raw material prices, but despite this, production and sales at many companies have grown slightly during the early part of the year.

“Companies view Finland’s economic outlook somewhat more positively than consumers and expect growth in the coming months,” Malinen says.

In construction, confidence declined in April.

“The measures decided by the Government at the budgetary talks to stimulate construction aren’t yet reflected in the balance figure, and weakness in the housing market, caused by low consumer confidence, is holding back the outlook for construction.”

Indicators for the other main sectors improved in April.

“Somewhat surprisingly, the increase in confidence is most visible in retail, which has traditionally been sensitive to private consumption and developments in consumer confidence,” Malinen says.

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