CONSUMER CONFIDENCE in Finland has rebounded slightly since hitting its all-time low in July.
Statistics Finland on Monday revealed that its consumer confidence indicator improved from -15.9 to -14.9 between July and August, remaining at a level that suggests widespread pessimism about the economic situation among consumers.
The indicator has a long-term average of -1.9.
“It’s still very bad,” Sakari Lähdemäki, the head of forecasting at the Labour Institute for Economic Research (Labore), summed up to YLE on Monday.
The lack of confidence stems particularly from pessimism about the Finnish economy. Public views on the outlook for the national economy fell almost to their lowest level in the over 25-year history of the indicator.
“The Finnish economy, in fact, has fared quite well. Even employment has improved. It’s possible that consumers are on the right track when it comes to the future, but we’re certainly not talking about as big a collapse as the public is expecting,” argued Lähdemäki.
He pointed particularly to the incongruence between public views on the national economy and public views on their own financial and employment situation. Employed and self-employed respondents, for example, estimated that their personal risk of being laid off or furloughed has worsened to a level that aligns with the long-term average.
“If the Finnish economy was really in a very bad shape, it’d have to be reflected also in the personal finances of consumers. Consumers are naturally better equipped to understand their own financial situation, but if you have to interpret these results I’d say we’re still looking at an overreaction to the prevalent situation,” he said.
“I don’t see any reasons for this extent of gloominess.”
The uncertainty among both businesses and consumers is attributable to the Russian invasion of Ukraine. Sami Pakarinen, a director at the Confederation of Finnish Industries (EK), reminded YLE that a similar development has been observed in the euro area.
“Consumers have really been startled by this unfortunate situation. Many households are currently also concerned about energy prices and what will happen to them next winter,” he said.
Finnish consumers have nonetheless tightened their purse strings in recent months: While this month was regarded as the worst time ever to buy durable goods, more than 40 per cent of respondents revealed that they intend to cut back on purchases in the coming year.
“Real wages are decreasing and inflation is very high. It inevitably has an impact on consumption and possibilities to save money. This does show that big purchases are being postponed and buffers are being set up for next winter,” analysed Lähdemäki.
EK on Monday reported that business confidence has been dented particularly in the retail sector.
“The largest change took place on the retail side. It came down rather sharply in August. It can be explained specifically by consumers’ uncertainty and hesitancy to spend money,” commented Pakarinen.
YLE reminded that the reluctance to make purchases may contribute to the creation of a vicious cycle. Postponing purchases until next year strictly as a precautionary measure may not be prudent, however, as inflation may have driven up prices significantly higher.
“There really is the risk that the cautiousness will start to be manifested as a slowdown in private consumption,” said Lähdemäki. “I don’t think there that kind of a downswing or recession in sight that would make it necessary to start saving in large numbers.”
Aleksi Teivainen – HT