Consumer confidence is low: is this already reflected in what we spend?

Consumer confidence has reached a temporary low, figures from Statistics Netherlands (CBS) showed on Wednesday. The question is to what extent that low confidence is already reflected in consumer behaviour.

You only really see trends in retrospect and other things also play a role. For example, in addition to the already rising inflation, there was a period of catch-up consumption after this winter’s lockdown, which is clearly reflected in transaction data from ABN Amro.

After the relaxation of the corona measures at the end of January, spending on hairdressers, clothing, spas and furniture was sky-high for weeks – often tens and sometimes hundreds of percents higher than the same weeks in 2019.

Also read: The consumer says: ‘not right now’

There is a lot of savings

ABN economist Nora Neuteboom points to the relatively good position of consumers. “The labor market is tight, people’s job security is high. A lot has been saved in the past two years, so people are eager to spend again, despite the higher prices.”

According to Neuteboom, the price pressure is still manageable for the time being. For many consumers, the higher energy prices for the home have not yet been taken into account. “We expect that inflation will only really hurt purchasing power when most people’s energy bills really start to rise and when the higher energy costs are passed on in even more goods and services. But we don’t foresee that until the course of this year and early next year.”

Still leave the car?

Consumer spending appears to have started to decline slightly in recent weeks. But that’s not necessarily a result of war-induced diminished trust in Ukraine. Such a peak after the relaxation will also decrease at some point – people do not structurally continue to visit the hairdresser more often, book holidays or buy a lot of new clothes.

It is difficult to quantify how strong this normalization effect is. And there are indications that high fuel prices have caused a temporary or permanent reduction in car use. The turnover of petrol stations has fallen in recent weeks despite the higher prices at the pump.

The traffic on the road also seems to indicate that people have left the car a little more often in recent weeks, researchers from the National Road Traffic Data Portal last week. The average traffic intensity appears to be slightly less high, but especially the congestion (length times the duration of the traffic jam) has clearly decreased.

The question is whether this effect is permanent or temporary. Neuteboom: “Fuel is a fairly inelastic good, it is difficult to find a good alternative for it. There is a good chance that after a temporary saving, people will buy more again at higher prices.”