Consumer Confidence Index shows deepening pessimism

The Globes-pwc Consumer Confidence Index fell by 1.2 points in July to 70.3 points.

The Consumer Confidence Index, compiled by Globes Research and pwc Israel, fell by 1.2 points in July to 70.3 points (baseline 100 = 1996), after rising by 8.6 points in June, and falling 22.2 points in May.

The Consumer Confidence Index survey, conducted by the Smith Institute, comprises three questions: "What in your opinion is the current state of the economy?"; "What will be the state of the economy in six months' time?"; and "What will be your personal economic situation in six months' time?"

For each question, "Globes" takes the proportion of optimists, deducts the proportion of pessimists, to obtain what is called "the net balance of optimism." If, for example, 40% of the respondents in the survey estimate that their situation will be better in six months' time, and 50% estimate that it will be worse, the net balance is minus ten percentage points.

The July index again shows a worsening of public expectations about the economic situation in six months.

The net balance of optimism fell by 6.8 points in July to minus 34.7 points, after rising by 8.1 points in June and falling 23 points in May. The public believes that the economic situation will be worse in six months than it is now, and the only question is how fast it will deteriorate.

Respondents' net balance of optimism about their personal situation in six months rose by 0.7 points in July, after rising by 9.5 points in June and falling 21.8 points in May. Despite the gain in the past two months, the net balance is still negative, at minus 3.3 points.

Consumers' pessimism, especially about their personal economic situation, will affect private consumption, especially in the fourth quarter of 2013. If the three-month moving trend figure continues to fall, the slowdown in private consumption is liable to be worse than the Ministry of Finance forecast of 3% annualized growth, which will hurt economic growth.

In conclusion, it should be noted that, despite the slump in almost all of the Consumer Confidence Index's components, demand for homes is rising. The proportion of respondents considering buying a new or second-hand home rose to a record 10.9%, up from 10.4% of respondents in June and 9.8% in May.

Published by Globes [online], Israel business news - - on August 15, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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