Service sector business confidence drops sharply

The service sectors’ confidence in the economy has decreased significantly. Roope Ohlsbom, an economist at Suomen Yrittäjät, the Finnish SME association, is concerned by the trend.

On 30 October, Statistics Finland published its consumer and business confidence indicators for October.

“Confidence is now weaker in the service sectors, which are for the moment keeping the economy afloat. If the service sectors enter the decline seen in industry and construction, an extended recession is possible. Without a turn in business confidence, unemployment is likely to rise during the next six months,” Ohlsbom says.

Service sector businesses’ confidence indicator was 0.2 in August, but -6.8 in October. The service sectors have been central to economic growth. Until August 2022, industry also sustained the economy, but then entered a decline.

The service sectors’ growth has slowed down considerably since the start of the year, Ohlsbom says.

Glimmer of hope in retail

Ohlsbom says that retail provides a glimmer of hope. In the retail sector, confidence increased slightly to -10.4 in October, whereas in July it was -14.3.

In October, the construction industry’s confidence indicator fell further to -41. This was five points below the September indicator. The long-term average is -7.

“The freeze in construction shows no signs of thawing,” Ohlsbom says.

Companies’ confidence is significantly below the long-term average in all main economic sectors.

Consumers’ expectations about unemployment bleak

The consumer confidence indicator was -12.6 in October, down from -11.5 in September.

“Grim news about the economy matter more to consumers’ outlook than slower inflation,” Ohlsbom says.

Consumers’ expectations about the unemployment rate continued to remain bleak. In addition, consumers’ assessments of inflation at the time of the survey and its future development remained high, even though inflation in Finland has measurably slowed.

Consumers also continued to consider it an extremely bad time to buy property.

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