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Consumer confidence down, business confidence slowly rising
The cycle of weak confidence is hampering economic growth.
Consumer confidence weakened slightly in February. The consumer confidence indicator, published by Statistics Finland, was -9.0 in February, compared to -8.4 in January and -8.6 in December. Last February, the confidence indicator was -9.5, and the long-term average is -2.6.
“Consumers’ weak confidence continues to be a significant barrier to the acceleration of fledgling economic growth,” says Roope Ohlsbom, an economist at Suomen Yrittäjät, the Finnish SME association.
Consumers’ outlook on the current state of their own finances became even bleaker, as did expectations of the general employment situation. Consumers also considered themselves at high risk of unemployment personally. They continued to consider the time extremely unfavourable for spending money and buying consumer durables.
“Somewhat surprisingly, consumers’ already high concerns about price increases became worse, even though inflation in Finland has remained low for a long time. The prevailing uncertainty is making many people save up a rainy-day fund instead of consuming. Consumer confidence has a broad impact on the economy, as household consumption accounts for around half of Finland’s GDP,” Ohlsbom says.
Reduced interest rates, consumers’ growing purchasing power and other positive factors are not yet evident at all in consumer confidence or private consumption.
“The weak consumption demand has a direct impact on companies’ ability to hire additional staff, reducing job vacancies. A cycle of low confidence in the economy, hampering economic growth, has appeared in Finland,” Ohlsbom says.
Business confidence slowly rising
Businesses’ confidence in the future has somewhat outstripped consumer confidence in Finland, the confidence indicator published by the Confederation of Finnish Industries shows. In February, business confidence increased moderately in industry and services. In the retail sector confidence declined somewhat, while the situation in construction remains extremely difficult.
“Overall, however, businesses’ confidence is significantly weaker than the long-term average. The newest figures show that businesses continue to be in unexpectant and uncertain mode,” Ohlsbom says.
“Small businesses, in particular, show signs of uncertainty. The most recent SME barometer shows that SMEs are split evenly between those who predict their finances will improve and those who predict it will worsen. The direction of the economy depends strongly on factors such as a perk in private consumption and the trade war initiated by Donald Trump, the unpredictable course of which companies are monitoring closely.”
Ohlsbom says that the unity of the EU and the negotiations it conducts will become more important as the spring goes on.
“If the negotiations are unsuccessful, Finland’s exports to the US and the outlooks for industry, in particular, could become significantly worse,” Ohlsbom says.
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