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1. Overview of the past

1.1. Finland’s economic situation and unemployment

Finland's economic development started to rise from the recession at the end of 1993. Consumers’ expectations of Finland’s economic situation were very positive from 1994 to 1995. After the mini recession at the beginning of 1996 estimates weakened but already in spring 1997 the balance figure of expectations was over +20. In autumn 1998 belief in continuing economic growth collapsed lowest since the recession year as a result of bad economic news from the world. After that expectations recovered fast, however. Weakening of export prospects in spring 2001 made consumers pessimistic about the economic situation of our country. Later assessments of the economic situation were varyingly cautious. In autumn 2007 consumer confidence in the Finnish economy started to sink when news of economic problems in the USA started to spread. The bottom was reached one year later.

From 1995 to 2000 consumers had strong belief that the rate of unemployment would go down. The balance figure of expectations reached +25 at the beginning of 1998. In autumn 1998 estimates fell somewhat. From 2001 to 2005 consumer views on the development of unemployment were mostly very pessimistic, and the balance figure fell below –20 at times. From summer 2006 onwards expectations were at last positive but news of dismissals and labour disputes caused hindrances to the development. With the economic recession the views grew promptly darker.

1.2. Own financial situation and saving

As Finland’s economy was recovering from the recession, consumers started to believe that their own financial situation would improve as well. The balance figure measuring expectations rose gradually starting from 1994 and reached the level of +10 at the end of the decade. From 2004 onwards belief in one’s own financial situation was even slightly stronger, and in February 2005 and 2007 the balance figure was record high, +14. Assessments of one’s own financial situation show variation according to the season: at the beginning of the year, at the time of pay rises and bargain sales optimism is usually stronger than later on. In 2008 the rise in interest rates and inflation gnawed at confidence in one’s own financial situation..

Consumers’ expectations of their saving possibilities improved hugely between 1995 and 2003. While the balance figure was a little over +10 at the end of 1995, it has varied between +40 and +50 in the last few years.

1.3. Consumer confidence indicator (CCI)

(CCI components: own financial situation and Finland’s economic situation, unemployment and saving.) During the recession years in the early 1990s consumer views on the economy were pessimistic as long as 1993. After this consumer confidence climbed high, but during the mini recession at the beginning of 1996 cautiousness gained more ground again. The mood picked up fast, however, and the value of the CCI was mostly above +15 between 1997 and 2000. In autumn 1998 the economic crises in the world, Russia included, slightly increased uncertainty about the general economic situation of the country. After the peak (+22) of the early part of 2000 confidence in the economy weakened clearly. Economic development started to slow down, and the CCI dived below +5 in autumn 2001. Belief in the economy strengthened temporarily at the beginning of 2002. The poor outlook of the general economic situation caused setbacks to the later rising trend. In 2008 these and uncertainty about one’s own finances weakened consumers’ confidence very strongly.

1.4. Inflation

At the turn of 1995 and 1996 consumers estimated that the general price level would have gone down by one to two per cent from one year before. As Finland became member of the EU, lower prices of food started to influence these views. Between 1997 and 2001 consumers’ estimates of inflation were very close to the measured inflation, with the exception of the price peak in energy and housing in 2000. The introduction of the euro in January 2002 and the related psychology, e.g. rounding of prices clearly "distorted” consumers’ views of inflation. From then on estimates exceeded the official inflation greatly until the end of 2006.

Consumers’ expectations of the coming inflation rate were mainly in line with inflation estimates. The years 1995 to 1996 and the first year of the euro, 2002, were notable exceptions to this rule. From 2004 to 2008 the expectations had a rising trend. Expectations, similarly as assessments, climbed record high, but fell clearly by 2009.

1.5. Favourable time

Between 1996 and 1999 the time was considered very favourable for buying consumer durables, until views became weaker in 2000 once inflation picked up a little. The introduction of the euro dropped the balance figure for buying negative, but at the beginning of 2003 a record of +37 was suddenly attained, mainly thanks to cheaper prices of cars. Assessments about buying got later slightly weaker but were still positive until summer 2008 and again this year.

Estimates about taking out a loan picked up during 1996 and rose to the balance figure of +42 in summer 1999. After that the rise in loan interests and high prices of dwellings again weakened sharply the view of the time being favourable for raising a loan. From the beginning of 2001 the time was again thought favourable for taking a loan, until the rise in interest rates sagged the estimates starting from spring 2006 and especially in 2008.

Consumer views on the time being favourable for saving hit rock bottom (the balance figure at its lowest –20) in the years after the recession, from 1995 to 1997. After this saving was considered worthwhile as income grew and tempting saving and investment targets appeared. During 2006 the balance figure for saving rose steeply and soon stopped at its record of over +35.K

Source: Consumer Survey 2010, July. Statistics Finland

Inquiries: Pertti Kangassalo (09) 1734 3598, kuluttaja.barometri@stat.fi

Director in charge: Ari Tyrkkö

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Updated 27.7.2010