After a long period of continuous declines and stagnation that began in November 2014, the Georgian Consumer Confidence Index has finally rebounded. In June 2015, the CCI reached -30.4 points, gaining 4.7 points relative to May 2015. This increase was driven by seasonal factors and a sense of greater macroeconomic and exchange rate stability.
There has been progress in both components of the CCI – reflecting perceptions of the current situation and of the future. Yet, the magnitude of improvement was quite different. The Expectations Index grew very modestly (by 0.9 points), extending an earlier trend. The Present Situation Index, on the other hand, jumped by 8.5 points (reaching -39.6 points) – the largest increase since the CCI survey’s launch three years ago. As a result, the gap between people’s perceptions of the present situation and their expectations, which has been growing for the last four months, has shrunk from 26 to 18.5 points.
There are two explanations for the increase in consumer confidence. On the one hand, as suggested by data from previous years, the month of June is typically characterized by an improvement in consumer confidence related to the start of the holiday season, lower fruit and vegetable prices, and summer discounts in retail businesses. In addition to this seasonal factor, after a series of devaluations and several months of frequent fluctuations, the GEL/USD exchange rate has finally stabilized at a new equilibrium level. This second factor is well reflected in the fact that there were no changes in people’s assessment of the past and future changes in the level of prices.
Improvements in the present situation index were mainly driven by m/m changes in people’s perceptions concerning the general economic situation (in June, 51.3% of respondents thought that it had got worse in the past 12 months, while 65.7% thought so a month earlier); own financial situation (in June, 41.4% of respondents said that it had gotten worse in the past 12 months, while 52.2% thought so in May); and major purchases (35.8% of respondents thought that it was NOT the right moment to make major purchases in June, while 43.1% thought so last month). The marked improvement on these indicators suggests that general demand conditions facing Georgian businesses are finally beginning to improve.
Regional, educational and age-related peculiarities
The patterns of change in the CCI were similar in Tbilisi and the Rest of Georgia (RoG), except that in Tbilisi consumer confidence started to recover already in May, achieving somewhat larger increases in both the present situation and expectations sub-indices. In June, Tbilisi reported a slightly higher CCI (of -28.2 points) compared to RoG (of -31.6 points). The present situation index increased significantly in both Tbilisi and the RoG (increasing by 7.2 and 9.1 points, respectively); expectations did not show much improvement in either location (up by only 0.3 and 1.3 points, respectively).
Looking at Tbilisi, 39.6% of respondents said that their financial situation had worsened in the last 12 months, as opposed to 51.1% giving the same answer in May. Furthermore, compared to May 2015, fewer people thought that the general economic situation had worsened in last 12 months (53% compared to 62% giving the same answer in May). Most importantly for businesses, 27.6% of respondents thought that June was a good time for major purchases, while 19.7% gave the same answer a month earlier.
Increased numbers of younger respondents (aged 35 and under) are expecting improved conditions for making major purchases. Specifically, around 32% thought so in June, compared to 25% in May. Price expectations have also improved. In June, 30% of respondents answered that they expected prices to increase faster or at the same rate, while 37% responded the same way in the previous month.
Finally, the only group for whom the expectations index decreased was people with higher education. This seems to follow from increased skepticism regarding the future economic situation in the country. In June, 21% of “educated” respondents said that the economic situation would worsen in next 12 months, while 15% gave the same answer in May.