The crisis environment is not only maintained, but also is dressed with dark employment prospects, the precariousness of domestic economies and the certainty that the situation will go on for a long time. Consumers simply feel exhausted.
Consumers seem to drag a lead ball. Millward Brown Consumer Behavior Index, is touching the bottom since November, with slight oscillations that in April return it to one of its lowest points. It should be noted that the field work with which the opinions of consumers were collected was carried out in the week of April 25, that is, after a week that, based on occupation data, has supposed an increase in activity. In theory this should have shown a certain relief. Not for those. Consumers move in a depressive environment. It can only be concluded that some event is expected to connect the economy to the European recovery or, more likely, to a political change of some sign unblock the feeling of lack of direction and bogging down. In the meantime, consumers seem exhausted.
In this general climate, the data that we are going to present bring three elements. On the one hand, a slight rise in household spending, which could be a dim light, may even be fueled by seasonality, but could also be a reflection of inflation. In parallel, disturbing clouds are discernible about employment. In addition, the data indicate that the crisis is seeping into the family economies, becoming more and more perceptible. The budgets of families, especially in the middle and lower middle class sectors, can no longer ignore the impact of the crisis. Let’s go by parts.
LIKE A LEAD BALL
Consumers seem to drag a lead ball. Millward Brown Consumer Behavior Index, is touching the bottom since November, with slight oscillations that in April return it to one of its lowest points. It should be noted that the field work with which the opinions of consumers were collected was carried out in the week of April 25, that is, after a week that, based on occupation data, has supposed an increase in activity. In theory this should have shown a certain relief. Not for those. Consumers move in a depressive environment. It can only be concluded that some event is expected to connect the economy to the European recovery or, more likely, to a political change of some sign unblock the feeling of lack of direction and bogging down. In the meantime, consumers seem exhausted.
In this general climate, the data that we are going to present bring three elements. On the one hand, a slight rise in household spending, which could be a dim light, may even be fueled by seasonality, but could also be a reflection of inflation. In parallel, disturbing clouds are discernible about employment. In addition, the data indicate that the crisis is seeping into the family economies, becoming more and more perceptible. The budgets of families, especially in the middle and lower middle class sectors, can no longer ignore the impact of the crisis. Let’s go by parts.
THE CRISIS REACHES FAMILIES.
The assessment of the family economic situation in the next six months is, at this moment, the key data of the components of the index. The observation in parallel of the three components of the index allows us to see several phases in the dynamics of loss of consumer confidence:
- Between mid-2008 and January 2010 the opinion on the situation of the economy of the country collapsed, not to recover since then.
- Since the end of 2009, with swings, there has been a (second) decrease in the valuation of the moment to make large purchases, an effect both of the entry into a deflationary phase of the economy -with negative CPI- and, later, by a aversion to increasing risk.
- Since September 2010, overlapping the previous ones, the impact of the crisis is becoming tangible in the economies of households, which are beginning to feel weaker each time, unable to stop their effects on their levels of life and consumption. The erosion of family economies also begins in September 2009, a point of inflection that opens a trend that still wreaks havoc.
THE RECOVERY IS REMOVED
As is natural given the dynamics described, in the economic discourse of citizens dominates the idea that the recovery is moving away. In such a qualitative opinion, collected with the standardized instruments of a survey it is logical that some oscillation occurs, as happened in April; but it is not relevant – it will not affect the trend. Pessimism covers the vision of the economic situation.
THE SPECTRUM OF UNEMPLOYMENT GROWS
Along with the filtering of the crisis in the domestic economies, which suggests that the termination of public aid is added to the destruction of employment, the most disturbing element is the very negative opinion about the future of unemployment. In the Survey of Consumers at the University of Michigan this question is included: “And speaking of unemployment, do you believe that within twelve months, one year, there will be more unemployment than now, the same or less?”.
The answers have a high correlation with the evolution of employment, anticipating it for a couple of months1. So far we had not included this question, what was done in April. If this pattern is met, in the coming months we can witness an alarming job destruction.
More than 40% of consumers think that there will be more unemployment in the next twelve months. It is obvious that consumers do not see the end of the destruction of the productive fabric.
THE REACTION OF CONSUMERS
What can a consumer do with the described picture? First of all reduce the risks. Risk aversion has become a structural factor, has grown over the months, drawing a curve that reflects the outbreak of the crisis, the expectations of recovery and the relapse in it in the last year and a half.
Although these indicators move in tenths, their trajectory is unequivocal. Everything else is emanations of this aversion to risk, which translates into retrenchment to savings, control of consumption, the pre-eminence of price as a purchasing criterion, the postponement of consumer decisions and disloyalty to brands. In short, the picture that has become familiar.
Descending to detail. The preference for brands of the distribution that has been defined in recent months against manufacturers, which has also become a structural element is maintained. This idea is complemented by the fact that it is a time to reduce consumption levels, again upwards.
We must think that these trends will continue and even increase in the following months, unless some seasonal impulse reacts economic activity. If the thesis that families start to feel that inflation is dragging their control of expenses is plausible, it is plausible to assume that they will lean more towards price as a decision variable.
Against the current of the idea of weak reactivation of consumption, even if it is seasonal, the perception of the moment to make purchases operates. The trend is still negative, which suggests that the increase in consumer spending is due more to the pressure of inflation than to loosen control over consumption.