People shopping in Iso Omena in Espoo on Tuesday, 26 July 2022. Consumer confidence in Finland has dwindled to its lowest level ever since the beginning of confidence measurements in 1995. (Mikko Stig – Lehtikuva)

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CONSUMER CONFIDENCE in Finland has slumped to its lowest level in the 27-year history of consumer confidence measurements in Finland.

Statistics Finland on Wednesday revealed that consumer expectations about how their own economic situation would develop continued to deteriorate from an already low level in June, with 28 per cent of respondents estimating that they are worse off than they were a year ago.

Nearly a third of respondents were concerned that their financial situation would erode during the next 12 months. More than a fifth (22%) of respondents contrastively expected their financial situation to improve.

Pertti Kangassalo, a senior statistician at Statistics Finland, highlighted that usually – and as recently as last winter – almost 30 per cent of consumers expect that their economic situation will improve and only 10 per cent that their financial situation will deteriorate during the next 12 months.

“We are living in an exceptional time of cautiousness and eroding economic confidence,” he summarised.

“Consumers in Finland typically are very confident in their own economy and its positive development in the future, which is why consumer views on their own economy are currently tremendously pessimistic.”

The pessimism is attributable to the employment effects of the coronavirus pandemic and the surge in inflation and interest rates caused by the Russian invasion of Ukraine. Kangassalo pointed out that inflation has been tangible particularly in fuel, food and electricity prices, all of which have direct repercussions for the finances of consumers.

“People still consider their own financial situation fairly good and do not really perceive the threat of unemployment,” he added.

Consumer expectations about the national economy remained similarly muted in July.

Up to three-quarters of consumers viewed that the economic situation has deteriorated in the past 12 months and more than half that the situation would continue to deteriorate in the next 12 months. Only 13 per cent of consumers, by contrast, voiced their confidence in the economic situation improving.

The Confederation of Finnish Industries (EK) on Wednesday reported that Finnish businesses have scaled down their expectations for all main economic sectors in response to the economy expanding slower than expected due to the war in Ukraine. The war has resulted in the halving of growth forecasts for this year from roughly three to one-and-a-half per cent, highlighted Sami Pakarinen, the director of EK.

Given the strong start to the year, he added, the realisation of the forecasts would require a significant slowdown in the economy.

“The fresh estimates of businesses indicate that the Finnish economy will decelerate substantially and that even a recession cannot be ruled out,” he commented in a press release from EK.

Labour supply is expected to be the main inhibitor of economic growth, with 40 per cent of companies in the service sector already identifying it as a problem. The growth of the sector is slowing down because of a shortage of especially logistics workers and a sharp drop in demand associated with crumbling consumer confidence.

Energy and material shortages, in turn, will be reflected particularly in construction and manufacturing, according to Pakarinen.

“Construction is already experiencing a downturn because output expectations have collapsed and the workforce is decreasing,” he told. “Manufacturing has been sustained by the economic situation, but also there the increase in orders and output is about to stop.”

Aleksi Teivainen – HT

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