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

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Consumer confidence improved markedly in May relative to the previous month. The improvement observed in the current month confirms the assessment that the deterioration seen in April was mainly due to the impact of developments in Cyprus. At the same time, the recovery of consumer confidence, which began in early 2013, appears to be stabilizing, showing noteworthy resilience to conjunctural changes. However, this recovery does not appear strong enough to restore consumer confidence to pre-Memorandum levels. 

The Consumer Climate Index – CCI (59.2) rose markedly (+3.6 points) relative to the previous month. Of the two component indices, the Consumer Expectations Index – CEI (72.6) registered the greatest improvement (+5.6 points) relative to April, while the Current Economic Conditions Index – CECI (39.3) increased marginally, by just 0.5 points.    

More generally, the course of the index since the beginning of the year shows that the recovery, which was recorded during the last quarter of 2012, has stabilized consumer confidence at nearly 60 points, despite some fluctuations. Moreover, the Current Economic Conditions Index has also displayed noteworthy stability, at nearly 40 points, during the first five months of 2013, after reaching its lowest point in October last year.

Propensity to buy (62.2) declined for the second consecutive month, falling by 2.4 points relative to April. Assessments of personal financial situation (16.4, +3.4 points relative to the previous month) approached levels recorded immediately after the most recent elections (16.6 in July 2012). Optimism about the future of the economy improved considerably. Short-term expectations (61.5) rose (+7.5 points), following three months of constant decline.

Long-term expectations (104.2) climbed above the 100-point mark, after their temporary drop below that level in April. Expectations of personal financial situation (52, +4.3 points in a month) registered the highest value of the past 31 months (11/2010 – 5/2013). However, despite the significant improvement in citizens’ expectations, not only regarding their personal future but also that of the economy, the majority remain pessimistic. Nearly 6 in 10 (58%) expect the economic situation to deteriorate in the coming 12 months, whilst exactly the same percentage of respondents believe that their personal financial situation will worsen in the next 12 months. On the other hand, citizens appear more optimistic about the economy’s long-term outlook. More specifically, 39% express optimism about the economy’s prospects over the next five years, compared to 34% who express pessimism for the same period.

Of particular importance are the expectations for unemployment. The percentage of citizens expecting a drop in unemployment over the next 12 months (12%), although remaining extremely low, reached the highest level since December 2009 (12.6%), rising for the third straight month. Expectations for inflation and saving remain negative for yet another month. Just 5% of respondents, a figure very close to the historical low for the period 2007-2013 (4% recorded in April), hope they might be able to save some amount of money in the year ahead. Lastly, 1 in 2 (49%) citizens believe that prices will rise further in the coming 12 months. This percentage has shown some degree of stability in the past three months, and is approximately 10% lower than the corresponding levels recorded in late 2012.

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