Not So Confident

The latest KBC/ESRI consumer confidence index show some contradictory changes to consumer sentiment as we finish the first quarter of 2009. The different components of the index give us some clue as to what is going on. There is one main sentiment index (the blue line in the chart), comprised from responses to five questions as follows (from the description of the methodology):

Q.1. How do you think the economic situation will develop over the next 12 months? (get better/stay the same/get worse)
Q.2. Do you think the number of people out of work in the country in the next 12 months will (increase/remain the same/decrease)?
Q.3. How does the financial situation of your household compare now with what it was 12 months ago? (got better/stayed the same/got worse)
Q.4. How do you think the financial position of your household will change over the next 12 months? (get better/stay the same/get worse)
Q.5. In view of the general economic situation at the present time, what do you think about people buying large items such as furniture, washing machines, TV sets etc. Do you think that for people in general the present time is (good/neither good nor bad/bad)?

There are two sub-indices: the red and green lines in the chart. Overall, Irish consumer confidence is still well below the historical trend since the series was created in February 1996. No surprise there. More worrying is the trend in the green line: the Index of Consumer Expectations. This is composed from the answers to Q1, Q2 and Q4. This particular index has continued downwards through the first three months of 2009, reaching an all time low in March 2009.

This sub-index is a measure of consumers' perceptions of the wider economy (with some assessment of its future impact on their future financial situation), and it seems that the constant background mood music of 'doom and gloom' continues to exact a toll on future confidence.