Consumers remain cautious about spending despite easing inflation in Finland

Consumers remain cautious about spending despite a easing inflation and gradually improving economic confidence. According to Statistics Finland, the consumer confidence indicator recorded a balance figure of -7.2 in July, slightly up from -7.6 in June and -10.3 in May. A year ago, in July, the figure stood at -8.8. This indicator measures consumers’ perceptions of their own finances and the overall Finnish economy, as well as their intentions to spend on durable goods.

Reijo Heiskanen, chief economist at OP Financial Group, notes that the rising confidence reflects a slowly improving economic situation and more optimistic expectations. “The consumer confidence indicator was at its highest level since Russia’s invasion began. While we were still seeing weak numbers in the spring, recent months have shown improvement that aligns with the overall economic context,” Heiskanen said.

However, Heiskanen cautions that consumer sentiment can be influenced by various factors. “Consumers react to discussions about the economy, such as during budget preparations, savings measures, or labor disputes,” he explained.

Henna Mikkonen, chief economist at Säästöpankki, anticipated even higher confidence levels, citing visible supporting factors. “Consumer purchasing power is on the rise, and inflation has calmed down. Nevertheless, I think recent weaker employment statistics have raised concerns among consumers, making them cautious.”

Consumers often overestimate inflation rates. Heiskanen pointed out that while the inflation rate was 1.3 percent in June, consumers perceived it to be over 5 percent. “Prices have risen significantly and remain high, leading people to feel that everything is becoming more expensive,” he elucidated. Mikkonen agreed, stating that there is a tendency to perceive price increases as greater than they actually are, which is evident at this time.