Economic Barometer – Consumer Climate Index (CCI) – July 2013


Consumer confidence deteriorated significantly in July relative to the previous month. The decline recorded in the current month is most probably due to recent political developments (closure of state broadcaster ERT, breakup of the ruling three-party coalition, government reshuffle), confirming the strong interaction between the consumer and the political climate. As things stand, it is not possible to forecast the course of consumer confidence, that is, whether the deterioration will prove to be conjunctural in nature or whether it marks the beginning of a reversal of the uptrend seen in recent months.
The Consumer Climate Index – CCI (51.7) fell dramatically, by 11.1 points, relative to June. The magnitude of the decline observed in July is the second greatest in the period since the signing of the Memorandum, surpassed only by the drop recorded in May 2010 (-18.7 points). Both component indices showed a marked decline. The Current Economic Conditions Index – CECI (37.1) fell by 11.5 points, whilst the Consumer Expectations Index – CEI (61.5) dropped by 10.8 points.
The CCI had shown a significant recovery in the last quarter of 2012. It then stabilized at around 60 points, exhibiting remarkable resilience to conjunctural changes, particularly developments in Cyprus in March 2013. During the eight-month period prior to July (11/2012 – 6/2013), the index gained a total of 17.5 points. But the sharp drop recorded in July resulted in the index reverting to the levels of December last year (52.9) and the loss of most of the gains registered in the previous period.
Propensity to buy (58.9) declined (-14 points) relative to June. Only 1 in 4 consumers (25%) believe that the current period is appropriate for major purchases of household equipment (furniture, electrical appliances, etc.).
Assessments of personal financial situation (15.3) showed a drop of 9 points relative to June, when they had risen to the highest level of the past 30 months (2/2011 – 7/2012), reverting close to the average for the year (15.6). Optimism about the future of the economy fell dramatically. Short-term expectations (49.6) dropped by 12.7 points in just one month. Long-term expectations (88.4, -13.6 points relative to June) fell – for the second time in 2013 – below the psychological 100-point barrier to register the lowest value since April 2012 (82.8). Citizens remain more optimistic about the long-term outlook for the economy rather than its short-term prospects. Only 14% expect an improvement in the next 12 months, but when the timeframe is expanded to five years, the proportion of those who believe that the economy will recover rises to 31%. Expectations of personal financial situation (46.4) registered the smallest decrease (-5.9 points) compared to the other indices, falling to the levels of last April. The vast majority of citizens express pessimism about the future, with only 7% expecting an improvement in their personal financial situation.
Despite the rapid deterioration in consumer confidence, expectations for unemployment, inflation and saving showed little change. One in 10 citizens (9%, -1% relative to June) expect a drop in unemployment over the next 12 months. Just 7% (-1% relative to June) hope they might be able to save some amount of money in the year ahead, whilst 12% (+1% relative to June) believe that prices will decrease during the same period.