After four consecutive months during which we have been observing some improvement in consumer confidence, in July 2015 the CCI dropped 4 points to -34.4 points. This setback is particularly disheartening given that in June the CCI increased by a solid 4.7 points (the present situation component of the CCI added 8.5 points – the largest increase since the CCI survey’s launch three years ago).
In July 2015, there has been a decline in both components of consumer confidence. The present situation index lost 3 points (down to -42.6 points); the expectations index dropped 4.9 points (down to -26.1 points). As a result, the gap between people’s (very low) assessment of the present and their expectations regarding the future shrank to 16.6 points, signaling that consumers are yet to see the light at the end of tunnel.
The latest setback in consumer confidence may be related to the recently announced adjustment in electricity tariffs which will disproportionately hurt poor households consuming relatively low quantities of electricity. Until now, such households faced a very low tariff of only 7.63 tetri per KwH, and the addition of 3.48 tetri represents a major hike of at least 43% in their monthly electricity expenditures. The extra 3.48 tetri per KwH inflicted a quite a bit of pain on other households as well (increasing electricity expenditures by 22-30% on average, depending on volumes consumed).
The new electricity tariffs will go into effect in August 2015, and so they mainly influenced consumer expectations. Indeed, in July, 41.7% of consumers anticipated that prices would grow at the same or higher rate, as opposed to 34.2% who thought so a month earlier. Unemployment expectations also deteriorated m/m (June to July) from 34.2% to 42.3% of respondents who thought that unemployment figures will stay the same or increase.
The downturn in the present situation index was primarily driven by people’s pessimism regarding the general economic situation. In July, 64% of respondents thought that the economic situation had worsened over the last 12 months, while 51.3% gave the same answer in June.
Regional, Gender and Age-Related Peculiarities
Overall, the CCI is nearly identical in Tbilisi (-34.4) and Rest of Georgia (RoG, -34.3). In Tbilisi, consumer confidence declined after increasing for two consecutive months (in May and June 2015). In RoG, consumer confidence continues to fluctuate around a (very) moderately increasing trend we have been observing since March 2015.
Price inflation has become a bigger concern in Tbilisi compared with RoG. In June, a roughly equal proportion of people in the capital and RoG (34.4 and 34.2%, respectively) expected prices to go up. By July, views have diverged. 45.7% of Tbilisi respondents now expect prices to increase as compared with only 39.4% in RoG, where people may be less dependent on markets for their food consumption.
The largest (negative) impact on the confidence of Tbilisi-based consumers comes from the m/m change in people’s assessment of the general economic situation. In July, 69% of Tbilisi respondents thought that the general economic situation had worsened, while 52.9% gave the same answer in June.
As has been mentioned in an earlier report Georgian women tend to be more pessimistic (or realistic?) than men. Since March 2015, the female CCI has been very consistently some 5-7 points below that of males. For now, this gap shows no sign of abating.