Consumer confidence hits a low – “Fears have intensified significantly”

The consumer confidence indicator, published by Statistics Finland, was -11.5 in March. In February, the indicator was -10.5, and in January -8.7. The long-term average is -2.8.

Consumer confidence fell in March to its lowest level in two years. Petri Malinen, Chief Economist at Suomen Yrittäjät, the Finnish SME association, says the exceptionally weak reading risks stalling the start of economic growth.

“Confidence is currently particularly fragile and reacting more strongly than usual to risks. 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 are being hit with a cold shower,” Malinen says.

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 threat of unemployment and security-related and geopolitical tensions. Many households continue to prepare for bleaker times.”

Malinen says the recovery in confidence and private consumption risks being delayed again, even though consumers’ purchasing power has been strengthening for some time.

“A weak labour market and inflation fears fuelled by the Middle East crisis are keeping consumers cautious, and a higher-than-usual saving rate reflects preparation for an uncertain future,” Malinen says.

Companies also hit

Business sentiment also weakened in March, the business confidence indicator published by the Confederation of Finnish Industries (EK) shows, and the outlook for growth this year has deteriorated.

“The US and Israeli attack on Iran risks slowing the recovery of the entire eurozone, which is feeding through to Finnish companies. Companies still view Finland’s economic outlook somewhat more positively than consumers and expect growth in the coming months,” Malinen says.

In construction, confidence has risen from its lowest point and turned upwards in March.

“The sector’s confidence figure remains weak, however, and the weakness in the housing market, driven by low consumer confidence, is holding back the recovery in construction.”

Indicators for other main sectors declined in March.

“The drop in confidence is particularly pronounced in retail and services, both of which are highly sensitive to private consumption and developments in consumer confidence,” Malinen notes.

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