Consumer confidence still below year-ago levels

 

 

 

According to a monthly survey by the Central Statistical Office (GUS), in December 2009 the current consumer confidence index stood at -18.9 points, down by 0.4 points compared with the month before. The slight decline of the current index was due mainly to a deterioration in consumers’ evaluations of household financial situation. At the same time, the indicator that measures current spending on major purchases improved last month, and so did evaluations of changes of general domestic economic situation over the past 12 months, though the latter component remained at a very low level.

Although the current consumer confidence index dipped slightly in December, this came after several months of uninterrupted improvements. As a result, the index was more than 11 points higher than its trough in March 2009, when the crisis reached its climax and consumer confidence was at its weakest. On the other hand, it was still almost 16 points below its peak reached during the height of the boom in November 2007.   

Meanwhile, the leading consumer confidence index continued its upward movement in December, reflecting a steady stream of improving economic data. It climbed by 0.8 points to -26.9 points last month. However, its value remained way below the current indicator, which illustrates the extent of uncertainty among Poles about the durability of the recovery. This high level of uncertainty also explains the December deterioration in consumers’ views about the outlook both for the financial situation of their household and for the general domestic economic situation over the next 12 months. Significantly, though, worries about unemployment in fact abated substantially in December, despite the advent of the winter season with its reduced supply of jobs. Even so, the job-outlook component of the index remained the biggest drag on its overall value. Meanwhile, December also witnessed an improvement in consumers’ assessments of their ability to save money over the next 12 months. In the period under analysis, the leading consumer confidence index was 22.5 points lower than in November 2007 but more than 15 points higher than in March 2009.

 

 

To recapitulate, latest macroeconomic data provide mounting evidence that the Polish economy is regaining strength. Nevertheless, there is considerable uncertainty over the durability of the recovery, and the situation on the labour market remains difficult. Under these circumstances, consumer moods are brightening up only slowly and the level of consumer confidence remains relatively low. Therefore we expect consumer demand to pick up only at a moderate pace in the quarters ahead. We forecast that in Q1 2010 private consumption will rise by 1.6% y-o-y, with a full-year forecast of 1.8% growth.

 

 

Paweł Sionko

Economist, PMR Publications