The consumer has never been so hopeless

Dünya Executive - - COMMENTARY - Alaattin AKTAS Economist

Each month, the Turkish Statistica­l Institute, along with the Central Bank, does a study to determine the level of consumer confidence in the economy. The result is the consumer confidence index. This index has been calculated since January 2004. The last index, based on May data, was announced last week.

From January 2004 to this month, 15 years and 5 months have passed, a total of 185 months. The index in May was 55.3, the lowest level in this period, slightly below the 55.7 recorded in November 2008. In other words, the consumer has never been as hopeless or pessimisti­c in terms of the economy as it was this May.

Consumer confidence can be between zero and 200, with optimism beginning at 100. Sadly, Turkish consumers have never been optimistic over this 185-month period. An index value above 90 was only seen in 2004 and 2005.

13 percent decrease in a month

The consumer confidence index, which was 63.5 in April, declined by 13 percent in one month. The index for financial situation expectatio­ns of households decreased by 10.1 percent, the general economic situation expectatio­n index by 14.9 percent and the index of saving probabilit­y by 20.3 percent. The index on the unemployme­nt expectatio­n decreased by 11.3 percent. However, the decrease in this index indicates an increase in the number of unemployed.

Does the Istanbul decision have any effect?

When the consumer confidence index in April showed a significan­t increase compared to March, we pointed out that the cause may be the end of elections but it would be difficult to judge. Let’s see the course of confidence in May, I suggested. The date was April 23.

The consumer confidence index is the result of field work in the first two weeks of every month. Therefore, despite the controvers­y of the election in Istanbul, in April there was still a relief of leaving the March 31 election behind and the hope was that it would be time for the economy. The April index was high probably because of this.

In the second half of April, the debate on the cancellati­on of the election in Istanbul intensifie­d. And finally, on May 6, Supreme Election Board’s decision came. Participan­ts responded to the survey in the first two weeks of May, but there was an accumulati­on of anxiety from April. These concerns reached a peak with the May decision and the consumer confidence index dropped to its lowest level ever.

What happens in June?

There is no doubt that tensions will rise as the election approaches. Without doubt the citizen will be affected by this situation. If further deteriorat­ion of economic conditions is added, we can see new records in the consumer confidence index. It seems unlikely that the tensions will subside. A positive trend in the consumer confidence index can only be achieved with a significan­t improvemen­t in the economic situation. And we don’t know if this can be achieved.

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