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Unhappy consumers
Fri, Jun 27 2008, 15:35 GMT
by Danske Research Team
Over the last couple of years we have seen a boom in private consumption in Central and Eastern Europe, but the signs are growing that CEE consumers are beginning to cave in to the pressure from falling asset prices, tighter credit conditions and higher inflation.
The recently published consumer confidence data for the new EU member states Poland, Hungary, the Czech Republic, Slovakia, Slovenia, the Baltic States, Romania and Bulgaria show that consumer confidence in CEE continues to decline.
CEE consumer confidence peaked a year ago (see top graph, left), and has been declining ever since. The decline in consumer confidence has more or less moved in parallel with consumer confidence in the euro area. However, in some countries in CEE, consumers are much harder hit than in the rest of Europe.
Consumer confidence developments have been especially negative in the Baltic States, where it has plummeted. This is no surprise given the significant tightening of credit conditions, the sharp rise in inflation and the bursting of the Baltic property market bubble.
The question is whether consumers in the other CEE countries will turn as negative as the Baltic consumers. We do not think so but, on the other hand, it is hard to see any light at the end of the tunnel at the moment. We are particularly concerned about the countries in CEE with the biggest imbalances and which have seen strong credit growth in recent years Bulgaria and Romania stand out as countries where consumers could soon cave into the pressures.
Published on Fri, Jun 27 2008, 15:37 GMT
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Danske Bank
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