Both consumer confidence and business expectations of economic development declined again during April. According to a study by Statistics Finland, consumer confidence has been weaker only on two previous occasions, with the onset of the Covid crisis in April 2020 and the end of the 2008 global financial crisis.
Similar levels were recorded last month, but the April figures painted an even gloomier outlook for the consumer economy.
People’s expectations of continued inflation were highest after Statistics Finland started recording the measure in 1995.
Respondents’ feelings about their own financial situation were also weak, with only a few planning to spend money on durable goods in the short to medium term.
In addition, only 10 percent of respondents believed that the Finnish economy would improve next year.
Economist Juho Keskinen In its review, Finnish mortgage lender Hypo pointed out that consumers are now in a gloomier mood than companies.
"However, as a result of the inflation caused by the war, consumers have become more attentive and selective and purchases are now being carefully weighed," Keskinen wrote and added that sentiment in the housing market has cooled, but no major collapse is expected.
Jukka AppelqvistIn his report, the chief economist of the Central Chamber of Commerce speculates that the gloomy outlook for households may be an overreaction.
"Households are still in shock as a result of the start of the war. Rising consumer prices are eroding confidence in one’s own financial situation as purchasing power is declining. I would still argue that household estimates are even too gloomy in some respects," Appelqvist wrote in his report.
He reiterated that there is already a headwind in the Finnish economy.
"Interest rate restrictions have been lifted and the opening up of the economy will compensate for the decline in exports. In addition, labor demand remains strong and the risk of unemployment low," Appelqvist pointed out.
War strikes construction
According to EK’s business cycle barometer, the economic outlook for Finnish companies has deteriorated the most in the construction sector.
"Russia’s attack on Ukraine is particularly evident in construction, where the situation has deteriorated rapidly. The availability of materials in particular is now a big problem, which is also seen as a huge problem on the industrial side. Although there is still enough demand in many places, uncertainty about the future, combined with a sharp rise in costs, is now significantly complicating the operating environment for Finnish companies," said Sami PakarinenDirector of EK.
In the service sector, labor supply problems have intensified in many areas.
Meanwhile, Pasi KuoppamรคkiDanske Bank’s chief economist said that inflation and the war in Ukraine cast a dark shadow over Finland’s economic outlook, but confidence indicators do not yet show panic.
"The fact that companies’ confidence remains relatively stable indicates their ability to adapt to the situation. The persistent shortage of skilled labor in companies and the moderation of consumer unemployment fears show that the labor market has remained stable," Kuoppamรคki wrote in his review.
The risk of accelerating inflation needs to be taken seriously, although inflation is expected to slow towards the end of the year.
"At the same time, the economy needs to adapt to a time when trade relations with Russia are freezing and export markets are cooling elsewhere," Kuoppamรคki summed up.
Source: The Nordic Page