Monday, 28 July 2008

Consumer Economic Expectation Worst Since 1990

"Consumers' confidence in all four components of the consumer confidence indicator weakened from the previous month in July. Consumers' expectations concerning Finland's economy were the gloomiest since the year 1990.

Views on the development of unemployment also darkened in July. Consumers' expectations about their own economic situation, too, were the most cautious since 1996. Nevertheless, consumers continued to regard their own employment prospects and saving possibilities as good.

July was not regarded a favourable time for making major purchases or for raising a loan, in particular. In addition, inflation was predicted to continue at its fast rate." said Statistics Finland

Let's look at some major index component :

1- Favourable time to raise a loan at present (index) :
20.0(average since 95) 42.0(max) -21.8(min) -20.8 (june) -21.8 (July)

Never seen so sharp decline and at this speed. The statistics unfortunatelly doesn't show the period 91-93, but I guess we are falling with this range...this is a very bad news for Finnish banks indeed and retailers, I'm wondering how they are going to survive...

2- Finland's economic situation in 12 months time :
5.2 (average) 21.7 (max) -20.8 (min) -17.0 (June) -20.8 (July)

Unbelievable, another record....we are now clearly in an unchartered territory...I'm questionning if this is real or just temporarly affected by high oil price and inflation... At least one thing is sure is that Finnish households are holding record debt thanks to subsidized housing interest rates, lack of land municipalities reforms and of course irrealistic/unsustainable low interest rates for the Finnish economy in the previous 8 years...

Back in February I did some kind of technical analysis on the consumer confidence and lay some hypothesis. Let's have a look at it: (See as well link Consumer Confidence or its Ability to Predict the Future... )

From the analysis below, the first scenario is out , we are now clearly into a recession area, so maybe we started the recession, usually the recession perception will be felt when the recession is ending, at it lowest point....

From the 12.02.2008:
What about a boom doom gloom technical analysis? :

In fact we have 3 scenarios:

1- The consumer confidence recovers from that point. We are just witnessing a mild slowdown. The US doesn't fall into a recession and Asia fully decouple from the rest of the world. Europe continue its record breaking growth. Everything is great and birds are still singing...

2- The consumer confidence fall to level seen in 2001. The U.S fall into a recession in the first half of 2008 and slowly recover through 2008 and beginning of 2009. We are witnessing a V shape recovery. Europe is growing albeit at a slower pace. Asia with China and India are still seeing good growth. Everything is fine and birds are still around...

3- The consumer confidence is on free fall, going much lower than the 2001 mild recession. Housing doesn't support any more economic growth instead become a drag. U.S. can't avert a recession and the Fed is struggling to stabilize the economy. It will take 3 years to start seeing good or near potential growth, it's a L shape recovery. Asia recouple with the economical issues seen in the US and Europe. Everything need to get worse before it gets better, bird flu is hitting again...

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