Leading indicators and tendency surveys

Consumer confidence remains low but signs of improvement appear

 

23/07/09 - Consumer confidence indicators in recent months have pointed to a marked improvement in sentiment since the historic lows recorded towards the beginning of 2009. Whilst encouraging, some caution is needed as confidence remains low by historic standards. This is shown in the following graphs for the major seven OECD member countries and the country grouping "OECD Area", which put consumer confidence indicators in a historical context.

 

The charts indicate that the low point in confidence across the OECD was reached in the first quarter of 2009, with tangible signs of improvement since then. The indicator for the OECD Area for example has risen for 4 consecutive months following 20 months of decline. Consumer confidence remains fragile, and in some countries, such as Japan and Germany, the improvement is more recent and marginal. However, given the importance of trade flows for economic growth in both countries, increased confidence levels in trading partners may lead to a more significant improvement of consumer confidence in the near future.

 

It is too early to say whether this indicates a durable change in consumers' perceptions. It is possible for example that the recent increases merely reflect a more sober assessment of the state of the crisis and a realisation that some of the more speculative doomsday scenarios now seem unlikely. It is possible that consumer confidence will merely stabilize at historically low levels rather than return soon to positive territory. In many ways anecdotal, consumer confidence indicators are beginning to echo the encouraging messages seen in other areas, such as the OECD's composite leading indicator.

 

OECD Area

Consumer confidence in the OECD Area has shown continuous improvement since February 2009 which was a record low since the series began in 1978. Confidence levels remain historically low however.

 

 United States

Consumer confidence in the United States has improved consecutively for the last 5 months but the level remains low. The chart, and in particular the recent double-dip, illustrates however the continued need for caution in interpretation. Increased optimism appeared to be returning in December 2008, after the first trough in November, but this was short-lived and confidence dipped again, possibly reflecting a number of factors: the very cold weather, the continued difficulties in the housing market, and increases in energy prices. The latest pick-up in confidence is stronger.

 

  Japan

Consumer confidence in Japan remains very low but has increased slightly since its historic December 2008 low. This continued pessimism, certainly when compared to most of the other major seven economies, may reflect the importance of trade to Japan and the need for tangible signs of recovery in Japan's larger trading partners. For example, Japan's index of industrial production has shown signs of improvement from February 2009 which was its lowest level since 1983.

 

  Germany

Consumer confidence in Germany has only recently shown signs of improvement, with the all-time low coming as recently as April 2009. Like Japan, German consumers may need to see tangible signs of recovery occurring in major trading partners before more signs of improved consumer confidence are observed. German exports for example have been in continuous decline since 2008, down 22% between the first quarter of 2008 and 2009. The improved signs of confidence in other major economies may be a sign of more positive times ahead for German consumer confidence.

 

United Kingdom

Consumer confidence in the United Kingdom has shown a strong recovery since January 2009, rising by more than 4 points but levels remain historically low in a background of rising unemployment. More promising signs, noticeably in the housing market where recent indicators suggest a bottoming-out are also emerging.

 

France

Consumer confidence has increased by almost 2 points since the all-time low in February 2009. Whilst encouraging, a backdrop of rising unemployment and other negative economic indicators suggest that the sustainability of improvements in confidence is uncertain.

 

Italy

Consumer confidence has increased since February 2009. Two points should be noted here: firstly that Italian consumer confidence never fell as far or as dramatically as most G7 countries, and secondly that Italian consumer confidence was falling before the crisis began. Italian unemployment has been relatively stable since the beginning of 2009 and the index of industrial production rose in April 2009 by 1% for the first time in twelve months.

 

Canada

Consumer confidence in Canada has increased by 4 points since January 2009 which coincides with more positive signs in the housing market; permits issued for dwellings increased by 14% (month-on-month) in May 2009. However unemployment is still increasing and other real indicators such as the index of industrial production and retail sales continue to paint a somewhat negative picture.

 

Methodological information

 

Consumer opinion surveys provide information on consumer sentiment based on both the general economic situation and the financial situation of the individual or family. The information collected in consumer opinion surveys is described as qualitative because respondents are asked to assign qualities (opinions), rather than quantities, to the variables of interest. Data obtained from these surveys are useful in their own right but are also used in the compilation of consumer confidence indicators.

The OECD standardised Consumer Confidence Indicators (CCI) are measures comparable across countries. Comparability has been achieved by careful selection of national indicators, and by smoothing, centring, and amplitude adjusting these series. For more information on the construction of these indicators click here.

 

Data

 

The OECD standardised Consumer Confidence Indicators (CCI) are available in OECD.Stat Extracts at http://stats.oecd.org/index.aspx?queryid=299

 

 

 

 

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