A nationally representative sample of around 350 Georgians, interviewed in early March 2020, reveals that the Consumer Confidence Index (CCI) has declined by a significant 13.6 index points (from -19.5 in February 2020 to -33.1 in March 2020), compared to February 2020. This is the weakest and lowest figure since March 2017. The steep decline in March reflected rising worries about the coronavirus during the survey period and concerns about the damage the virus would cause. Additionally, it is quite possible that social media posts about the virus could also spread panic and negatively impact consumer behavior caused by the changes in how they worked, shopped, ate, traveled etc.

Returning to the consumer confidence figures, it is noteworthy that both sub-indices, the Present Situation Index and the Expectations Index, contributed to the decline. More specifically, the Expectations Index played a larger role in the decline. It is also important to highlight that both sub-indices in March 2020 hit their lowest levels in the recent two years. In terms of numbers, the Present Situation Index declined by 11.3 index points (from -22 in February 2020 to -33.3 in March 2020), and Expectations Index dropped by an even more significant 16 index points (from -17 in February 2020 to -33 in March 2020).

Based on the questions asked during the interviews, below we present Table 1 that shows which particular questions caused the sharp decline in Georgian Consumer Confidence in March 2020.

Table 1: March 2020, Changes in Consumer Confidence (Index Points), by Questions

Note: Questions in red stand for present situation

Not surprisingly, under current circumstances of social distancing, event and facility closures, temporary unemployment (caused by government restrictions) and shaken consumer confidence, at present, Georgian consumers are mostly concerned about making major purchases and savings.

Fear is a major driving source for human behavior, and the human brain is hardwired to avoid and prevent losses. Social scientists studying human decision-making have found that people usually and habitually place a higher value on the things they have and could lose, than on the things they do not have but could get. Although our consumer confidence data does not allow us to make inferences about people who temporarily became unemployed due to the coronavirus outbreak, these people are the number one negatively affected group who have made new decisions about how they will go about their daily lives and correspondingly have changed their consumer behavior. Basically, these people temporarily have lost their income source and most probably are living off their savings. Likewise, given that economic circumstances are likely to worsen in the coming months, consumers, generally foresee a reduction in the supply of jobs and a deterioration in their families’ financial situation. Therefore, this current situation will be reflected in the expectations. In expectations, based on consumer confidence data, and as presented in Table 1, Georgian consumers are more worried about the general economic situation, inflation, and the change in their personal financial situation; and they also find making major purchases and unemployment as major sources of anxiety.

CONSUMER CONFIDENCE IN REST-OF-GEORGIA IS HIT MORE THAN IN TBILISI

If we look at the Consumer Confidence Index separately for Tbilisi and the Rest-of-Georgia, we again observe a sharp drop in March 2020. For Tbilisians, the Consumer Confidence Index in March 2020 decreased by 12.7 index points (from -17.7 in February 2020 to -30.4 in March 2020), while for the non-Tbilisi population the Consumer Confidence Index in March 2020 dropped by even more, -15.6 index points (from -21.4 in February 2020 to -37 in March 2020). Table 2 below helps us to understand what were the major concerns for both groups that caused the decline in their respective consumer confidence.

Table 2: Tbilisi vs. Rest-of-Georgia: March 2020, Changes in Consumer Confidence (Index Points), by Questions

Note: Questions in red and bold stand for present situation, questions underlined – for expectations

When observing consumer behavior in Tbilisi, we note that Tbilisians are mostly concerned about making savings and major purchases at present. When it comes to expectations, Tbilisians are worried about the general economic situation, the change in their personal financial situation and unemployment. When analyzing data for the Rest-of-Georgia population, at present their main apprehension is making major purchases.  Additionally, the non-Tbilisi population is concerned about the general economic situation and inflation over the past 12 months.  In expectations, the population outside the capital is mainly bothered about the general economic situation and inflation. Additionally, again considering expectations, they are worried, to a lesser extent, about their personal financial situation, unemployment and making major purchases. So, a right question here to ask is “Do all these changes have to do with the current virus pandemic?!” and also “Does social media around the world make the virus seem worse than it actually is?!”

OLDER GEORGIANS ARE MORE ANXIOUS!

The chart above displays that in March 2020 older Georgian consumers have been affected more negatively than younger Georgians (less than 35 years old), mirrored in the Consumer Confidence Index data. Numbers reveal that Consumer Confidence for the “Young” dropped by 11.4 index points in March 2020 (from -18 in February 2020 to -29.4 in March 2020), and for the “Old” (more than 35 years of age) the corresponding change is -14.7 index points (from -20.2 in February 2020 to -34.9 in March 2020). In short, younger Georgians are more pessimistic than they were in the previous month, but the growth in pessimism was even greater among older Georgians. When splitting the Consumer Confidence Index into Present Situation and Expectations Indices, it is again observed that both groups have lost more confidence in expectations, the latter having more weight in the overall negative change of consumer confidence. So, the Expectations Index declined by -13.3 index points (from -16.1 in February 2020 to -29.4 in March 2020) and -17.3 index points (from -17.4 in February 2020 to -34.7 in March 2020) for “Young” and “Old,” respectively. Table 3 below also demonstrates that older Georgian consumers are more negatively affected concerning both the present and future. Here again we have to ask, “Do all these changes have to do with the current virus pandemic?!” and “Does social media around the world make the virus seem worse than it actually is?!”

Table 3: “Young” vs. “Old”: March 2020, Changes in Consumer Confidence (Index Points), by Question

Note: Questions in red and bold stand for present situation, questions underlined – for expectations

Finally, how and why the current situation related to coronavirus pandemic impacts the short- and long-term behaviors of consumers remains to be seen. Much will depend upon the duration of the crisis; how quickly and how confident Georgian consumers are that their risk factors are diminished.

Until then, stay well.

MONTHLY AND YEARLY CHANGES IN THE CCI VARIABLES

BAR CHARTS: CONSUMER RESPONSES BY QUESTIONS