Weak consumption hits confidence

  • 2010-11-25
  • From wire reports

TALLINN - Estonian consumer confidence fell to the lowest level in seven months in November on growing pessimism over the employment outlook, a sign that a recovery in domestic demand may be delayed, reports Bloomberg. The consumer-confidence index fell to minus 7, declining for a third month, from minus 6 in October, the Estonian Institute of Economic Research said on Nov. 19 on its Web site. The data is not seasonally adjusted.
“The biggest worsening was in expectations concerning the labor market,” the institute said. “Residents think unemployment could temporarily rise in the next 12 months, even though the situation is much better than in November last year.”

Estonia’s export-driven recovery from the second-deepest recession in the 27-member European Union has been held back by weak private consumption, as unemployment remains at 15.5 percent and the household debt-to-disposable income ratio exceeds 90 percent, according to the central bank. Retail sales, which have tracked an improvement in consumer confidence, returned to annual growth in September.

Economic growth in coming quarters depends on how domestic demand recovers, as export demand may slow, the Finance Ministry and the central bank said earlier this month. Estonia is due to adopt the euro in January.
The financial situation of the households worsened “somewhat” in November, the institute said. Thirty-eight percent of residents said they can save some money during the coming 12 months, while 50 percent said they can make ends meet and 11 percent said they live off savings or are chronically indebted. Consumers’ inflation expectations for the next 12 months remained unchanged from October, the institute said.