Small household confidence increases, but remains bleak

In March, there was a small increase in household confidence, but overall sentiment remains bleak. The confidence indicator, released by Statistics Finland this morning, had a value of - 10.8 in March. In February, the corresponding figure was - 11.9, which means that the trend is currently upward, but we are still far from normal. The confidence indicator's long-term average is 2.2.

Consumer confidence is much better than the darkest estimates at the end of last year. In December, confidence reached an all-time low of 18.5.

The mood is in many ways contradictory. The war in Ukraine continues, the state is getting into debt in Finland, and the inflation is still raging at high levels, so there are no conditions for household confidence to return to normal, says Jukka Appelqvist, chief economist at the Central Chamber of Commerce.

The willingness to buy homes, cars, and durable goods is very weak.

Employment growth has been better than expected in the winter, which has supported households' combined purchasing power despite inflationary pressures.

In March, my perceived threat of unemployment went up, but the situation is still normal. The fear of unemployment is nowhere near the levels historically measured in the darkest economic cycles. Appelqvist says that households seem to believe in a mild downturn in the labor market.

The overheated inflation situation will ease quickly, because households don't have enough confidence in it. Consumer prices are expected to increase by 5.3 percent over the next year. The willingness to buy homes, cars, and durable goods has remained very weak at the same time.

We have survived the winter, and the worst fears of an energy crisis have not materialized. We have enough faith that we will avoid a direct catastrophe. The outlook is so uncertain that there is little willingness to make expensive purchases, and the prospects for private consumption remain weak, according to Appelqvist.

The survey was conducted in the first half of March, so recent concerns about a possible banking crisis are not yet reflected in the results.