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Economy in Brief

Confidence in Finland Continues to a New Record Low
by Robert Brusca  June 27, 2022

After peaking late in 2021, confidence on the part of Finland's consumers has continued to move lower over 12 months. The confidence indicator averages -2.9 points over 12 months, it averages -8.2 points over six months, it averages -12.5 points over three months, and in June, it logs a reading of -14.3 points. This is a new historic low reading. Consumer attitudes obviously are being greatly affected by the war that is going on in Ukraine and by the potential for that war to spread because of Russia's aggressive posture and threats.

The June reading of -14.3 is the weakest reading for that index on data back to July 1999. For the economy, the current assessment is a reading of -43.2; it has a low 8.7 percentile standing, another very weak reading. The rating for the economy in 12-months has a June value of -30.4 and a percentile standing in the 1.4 percentile mark near the bottom of its historic queue of values.

Garnering a strong response is the reaction to consumer price inflation for 12 months ahead, which is at a 6.3 reading in June compared to a 5.9 response in May. That resonates as a 99.6 percentile standing in its historic queue of data. On data back to 1995, there has not been a stronger response for expected inflation.

Unemployment in Finland in 12 months registers a -8.5 compared to -8.1 in May. It is slightly higher, compared to April's -11.2 value and it marks a 59.1 percentile standing for the response. Clearly there are concerns about unemployment, but for the moment these concerns aren't as pressing as more general concerns about the economy and inflation. The individuals' personalized threat of unemployment this month rose slightly, moving to -2.3 from -2.6 and has a historic standing in its 60.5 percentile which is very close to the 59.1 percentile standing for the overall economy. At this time, Finish people don't seem to see any greater or lesser personal risk of unemployment than they see for the economy at large.

Assessments of the environment cluster around weak values. The favorability of the time to purchase durables has been slipping steadily; it fell to a -20.7 mark in June from -14.8 in May that had been -8.8 in April. That slippage has been steady and quite dramatic drop; it brings the reading to its lowest ranking in the history of the report.

The favorability at this time for saving also has slipped to -6.9 in June from -1.1 in May and +3.5 in April. This June response has a 3.6 percentile standing, a very weak standing for the favorability of the ‘time for savings.' It's not a good time to purchase durables and it's not a good time to save.

The favorability of this period for raising a loan balance has also slipped; it fell to -34.2 in June from a reading of -28.5 in May that was at roughly the same level in April. The June value has a 2.2 percentile standing in the historic queue of data on this response. Consumers clearly don't see this as a good time for raising a loan balance and increasing debt, or for saving or for buying durable goods.

However, on the matter of household financial situation, the assessment readings have eroded only slightly over the last three months. At 27.6 in June, the rating is only marginally weaker than 29.5 back in April and it still has an 83.3 percentile standing overall. Households' current financial situation is still quite good by historic standards, in the top 20 percentile of the various assessments that Finns have given it. They are concerned about the future and concerned about executing transactions in this economy even though they have solid current financial situations.

The prospects for savings over the next 12 months show some slight erosion; the June value is 45 and that compares to an April value of 49.7. Its percentile queue standing is at its 47.5 percentile which is below its 50th percentile, marking it as a below median response. However, it's not below the median by very much and that marks the possibilities for savings to be not too different from the historic median and characterizable as ‘normal.'

Clearly there are concerns about the economy and about employment. The Ukraine-Russia war is obviously a significant factor especially since Russia has mentioned specifically circumstances involving the Nordic states on several occasions and because Vladimir Putin continues to talk about Russia's right to expand the Russian empire back to some historic and yet unspecified benchmark.

Finland's as an EMU member is part of the European block that has an entrenched inflation problem and faces a tightening monetary policy from the ECB that will be restricting growth in the period ahead - even though the ECB has yet to take real steps to achieve that end. Finland is fiscally conservative. It faces tough times ahead. Clearly the consumer is feeling pressure and the slippage in confidence and in the economic environment over the past year describe a challenging set of current conditions.

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