Growth expectations not reflected in consumer confidence, businesses more upbeat

The consumer confidence indicator, published by Statistics Finland, was -8.7 in January, compared to -7.3 in December and -6.5 in November. The long-term average is -2.8.

“The fact that consumers’ confidence in the current state of their own finances weakened compared with November is harmful for economic growth,” says Petri Malinen, Senior Economist at Suomen Yrittäjät, the Finnish SME association.

Consumers’ assessments of their own financial situation one year from now also deteriorated. The overall picture continues to be weighed down by extremely negative views of Finland’s economic outlook.

“Bleak expectations are being sustained by the threat of unemployment, above all. Many households continue to prepare for more difficult times,” Malinen says.

The recovery in private consumption has been slower than expected, even though consumers’ purchasing power has been strengthening for some time.

“The high unemployment rate and general uncertainty are keeping consumers cautious. We’ll have to wait well into the spring for a clear turnaround in growth,” Malinen comments.

Business expectations improving

Business cycle expectations among companies are by contrast gradually recovering, says the business confidence indicator published by the Confederation of Finnish Industries (EK). Growth is expected over the course of this year.

“A faster-than-expected recovery in the international economy, as well as a calming of the situation with Greenland, have strengthened business confidence in the future,” Malinen notes.

Companies are slightly more optimistic than consumers in their expectations of Finland’s future economic performance. Companies are slightly more optimistic than consumers about Finland’s future economic development. The most positive trend can be seen in services, where prospects improved at the same time as industry’s earlier momentum appears to have eased into only a modest recovery.

“Confidence in construction is also improving, although the indicator remained weak,” Malinen says.

“Finland’s recovery continues to be held back by the negative cycle of unemployment and weak confidence. Persistently high unemployment undermines consumer confidence, which in turn restrains the growth of private consumption. Weak private consumption then slows the recovery in employment.”

Malinen says the delayed start to economic growth is also visible in Finland’s labour market. According to Statistics Finland, there were 51,000 more unemployed people in December than a year earlier.

“It is also unfortunate that the increase in the trend employment rate for those aged 20–64 appears to be fading, with the figure standing at 75.8% in December. It seems that the stuttering of the economy risks cutting short the positive development in jobs,” Malinen comments.

“Although unemployment figures remain high, there are nevertheless some positive signs in the air. Falling interest rates and inflation remaining low are supporting consumers’ purchasing power, even if confidence in their own finances has taken a small knock.”

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