More Evidence Of Declining Consumer Confidence

Consumers, in many countries appear to be loosing confidence. Yesterday it was the consumers in the Low countries who reported having second thoughts about their futures. Today it is the consumers in the UK and Sweden. Consumers in Germany, however, are the exception, being slightly more optimistic in December than they were in November. The measures of confidence in Germany and the UK were compiled by GfK, a large market research company and that for Sweden by the Swedish National Institute of Economic Research. The three measures are shown on the attached chart. The measures for Sweden and the UK show a fair amount of volatility while that for the German measure shows minimal variation. The standard deviations of the three series, which measures the degree of dispersion, are 11.7 for Sweden, 11 for the UK and 2.9 for Germany. The magnitudes of the three series are substantially different. The mean for the Swedish measure is 7.4% and for the UK measure, -10% and for Germany, 3.4%.

The GfK December measure confidence indicator for the UK was unchanged from November at -21%, however, it should be noted that the strongest component of the December measure was the willingness to buy goods. It so happens that among the austerity measures Chancellor Osborne has initiated to reduce the budget deficit is an increase in the Value Added Tax from 17.5% to 20% to take place on January 4th. Were it not for this spur to buy before the tax increase, the overall index would most likely have fallen. At -21%, it is well below its long term average of -10%. Although the Swedish measure declined to 20.8% in December from 22.6% in November, it is 13.2 percentage points above the level of a year ago and is well above its mean of 7.4%. The increase in the German measure was small from 5.2% in November to 5.5% in December. GfK also publishes a forecast for the month ahead for Germany. The forecast for January is for a slight decline to 5.4%.