Confidence Rebounds as Worries of Rising Food Prices Ease

12 03 2008
CCI March08

As fears of rising food prices subsided, consumer confidence rebounded in February. Optimism toward the economy’s future outlook increased as the economy turned out to be not as bad as initially perceived. Against this backdrop, the Consumer Confidence Index (CCI) recovered in February, up 2.5% to 80.4 from a two-year low of 78.4 in January.

Last month, consumers were burdened by rising food prices and kerosene fuel shortages. Job opportunities were also scarce. However, present conditions did improve somewhat, since the kerosene shortages were not so acute, while prices of rice eased even though the prices of some imported basic foodstuffs remained high. Against this backdrop, the Present Situations Index (PSI) edged up 0.2% to 60.2 in February. Yet despite the slight increase, the very low level of the PSI shows that consumers still have strong concerns over the state of the economy.

The relatively lower inflation in February raises consumer hopes of better living standards over the next six months. Looking ahead, the majority of consumers expect busier economic activities in the months ahead. Against this backdrop, the Expectations Index (EI) climbed from 92.1 to 95.5 in February.

As consumers are more upbeat on the nation’s outlook, consumer appetite for the purchase of big-ticket items increased in February. The proportion of consumers who plan to buy durable goods rose to 26.6% from 25.1% in January. Notably, buying intentions for goods often purchased on credit – such as houses, land, motorcycles and home appliances – all rose thanks to the declining loan rates. Also encouraging consumers to spend are the huge discounts on luxury goods (including audiovisual products).

The Consumer Confidence toward the Government Index (CCGI) fell 4.8% to a five-year low of 93.3 in February. Notably, consumers remain unconvinced in the government’s ability to spur growth (the index fell 7.2% to its lowest ever level of 86.6). In fact, consumers remain doubtful that the economy can grow quickly enough to generate new job opportunities in the months ahead. Download Report