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Economy in Brief

National Bank of Belgium Consumer Confidence Languishes
by Robert Brusca  August 22, 2022

The National Bank of Belgium index for consumer confidence rose to -11 in August from -13 in July, returning to its June level. Three months ago, the index stood at -13. Six months ago, it stood at +1. Twelve months ago, it stood at +5. Despite the month-to-month improvement, the index has been on a weakening trend; it has weakened most sharply over three months. The index positions itself in the lower one-third a of its values since 1991 with a 32.1 percentile queue standing. This reading means that the index has been weaker than its current value about one-third of the time, marking this as among some of the weaker readings for Belgium since 1991, roughly the last 30 years.

The economic situation for the last twelve months made an improvement to -57 in August from -63 in July. This is a weak assessment. The August trailing assessment of -57 has a queue standing in its lower 7.6 percentile. The companion rating this month, for the next twelve months, looking ahead, has a reading at -32, which is a slight improvement from July's minus 37 rating. The 12-month ahead August reading is even (slightly) weaker in its historic queue than the evaluation of the past twelve months with a 5.8 percentile standing. Clearly the economic situation has been poor, and is expected to remain poor, despite the slight month-to-month improvement. This month's report earns the sound of one-hand clapping.

Price trends in the BNB survey over the previous 12 months more or less stabilized with a reading of 86 in August compared to 84 in both June and July. Over the next 12 months, some progress on inflation is expected with the index falling to 19 compared to 25 in July and 34 in June. Nonetheless, the broad progression of this index has been for deterioration with the 12-month-ago reading at 19, the six-month-ago reading at 33, and the three-month-ago reading at 41. Clearly, this shows a local trend of improvement that is resisting a broader trend of deterioration. The standing for price trends for the next 12 months is at its 52.6 percentile mark. This is an extremely sharp improvement from the 99.7 percentile standing that evaluates price trends over the last 12 months. The standing assessments show that inflation has progressed from some of the very weakest reading in the history of the survey to readings that are far more centrist near the middle of the distribution. That level of assessment might seem surprisingly high given the height of inflation in the EMU relative to target that prevails today. It may be colored partly by encouragement that the past extraordinary inflation environment is being put to rest.

The unemployment forecast shows some heightened risk of unemployment in the August index as it climbs to 16 from a level of 12 where it stood in both June and July. The unemployment forecast has had an uneven progression from twelve-months to six-months to three-months. Its current standing, at a value of 16, has a 34.7 percentile standing in its historic queue of data marking unemployment expectations is being close to the lower one-third of values in its queue of ordered data since 1991. Unemployment is more greatly feared, but the fear is not pronounced.

The major purchase index for the next 12 months has stabilized over three months at a reading of -20 in August. It had steadily eroded from twelve-months to six-months to three-months. Similarly, the present index has eroded and shows only a one-month improvement after a string of erosion.

The financial situation for the last 12 months stabilized at readings of -17 in each of the last three months. However, that represents a deterioration since 12 months ago the reading was -5, six months ago it was -11 and three months ago it was -13. The assessment of the last 12 months has deteriorated and then stabilized. It has stabilized at a level that is in the lower one percentile of its historic queue up data! The assessment of the past 12-months has been extremely poor for a household's financial situation. Over the next 12 months, the household financial situation garners a -8 reading in August compared to -7 in July and -8 in June. The broader progression shows that twelve months ago, the household assessment was at zero, six months ago it was at -5 and three months ago it was at -9. The current -8 rating has a 1.6 percentile standing, once again an extremely weak reading, among the weakest 2% of ratings by households of their financial situation looking ahead to the next twelve months since 1991.

Households rate their ability to save over the next twelve months more favorability this month; the favorability of saving currently improved slightly as well. Their respective standings, however, are moderate. The next twelve-month reading has a 63.9 percentile standing and the assessment of the current ability to save has a 52.2 percentile standing. These are mid-range assessments.

Summing up
The consumers responding to this survey show some month-to-month stabilization, but for the most part, demonstrate readings that are weak with somewhat improved inflation expectations, coupled with rather pessimistic assessments of the economic situation. The assessment of conditions to make purchases has stabilized, but at a reading that's in the lower one-fifth of its historic range. That's an improvement from the assessment of present conditions which stands in the lower 6.6 percentile scraping the bottom on the barrel of its historic range. Consumers evaluate their past and prospective financial situations as being poor – extremely poor. On balance, this is a sour report and not particularly surprising given events in Europe with the ECB raising rates, determined to knock a very high inflation rate down and with the war going on in Ukraine not far from the borders of European Monetary Union members. It is also a time of slowing global growth and of dwindling, but lingering, pandemic issues. Economies have been weakened from the fallout from the pandemic fight and yet they need to fight further to push inflation back down while remaining vigilant about geopolitical events and risks. All this is taking a toll on consumer confidence.

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