Consumers’, businesses’ confidence in economy plunges

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Negative outlook for forex, jobs, prices

By Elizabeth Adegbesan

‘Price level will remain upbeat’

Economy

The Consumers’ confidence in the economy has taken a huge decline by 3.0 index point to 0.3 index point in the first quarter of this year (Q1’20) from 3.3 index point in Q4’19.

On the other hand the level of confidence reposed on the country’s macro-economic outlook by businesses fell by 20 index points to 6.6 index points this month  from 26.6 index points in February.

Giving this insight, the Central Bank of Nigeria (CBN), in its  Consumer Expectation Survey Report for Q1’20, bank noted that consumers were pessimistic due to the adverse state of the country’s economy.

The report also showed that consumers expect the country’s local currency (naira) to appreciate in the next twelve months while they expect rise in unemployment rate during the period.

The report stated: “The consumers’ overall confidence  outlook dipped in Q1’20, as consumers were pessimistic in their outlook. The index at -0.3 point was 5.1points lower than the index in the corresponding period of 2019.

“Respondents attributed this unfavourable outlook to declining economic conditions. The consumers were however optimistic in their outlook for the next quarter and next 12 months with indices of 28.9 and 43.3 points, respectively.

“This positive outlook could be attributed to the expected increase in net household income, expectations to save a bit and/or have plenty over savings and an anticipated improvement in Nigeria’s economic conditions in the next quarter and the next 12 months.”

On borrowing and exchange  rates outlook, the report stated: “With indices of 2.2 and 11.7 points,

respectively, consumers expect the borrowing rate to rise, but expect the naira to appreciate in the next 12 months.”

On unemployment rate, it said: “The unemployment index for the next 12 months remained positive at 27.7 points in Q1’20, indicating that consumers generally expect the unemployment rate to rise in the next one year.”

On outlook on price changes respondent expected  rise in prices of goods and services in one year.
Businesses’ confidence

In a related development, businesses are shedding their confidence in the country’s macro-economic environment as the confidence index dropped by 20 index  points to 6.6 index points this month  from 26.6 index points in February.

According to the CBN’s “Business Expectation Survey Report” for March 2020, businesses have expressed optimism showing greater confidence in the country’s macro economy this month and in the next six months.

The report also showed that  respondent firms expected further rise in inflation rate to 11.75 percent in the next one year from 12.20 percent recorded  in February 2020.

The report stated: “At 6.6 index points, the overall confidence index (CI) indicated respondents’ optimism on the overall macro economy in the month of March 2020. The business outlook for April, May and September 2020 showed greater confidence in the economy, with 48.3, 45.4, and 50.3 index points, respectively.

“The optimism on the macro economy in the current month was driven by the opinion of respondents from manufacturing (3.3 points),    agric/services (2.5 points), construction (0.7 point) and wholesale/retail trade sectors (0.1point). However, the major drivers of the optimism for next month were agric/services (25.9 points), manufacturing (17.6 points), wholesale/retail trade (3.8 points) and construction (1.0 points) sectors.
“Similarly, the order of sectoral optimism recorded in the next month remains unchanged for the next two    and six    months.

“Further analysis showed that businesses that are neither import    nor export oriented (3.9 points), both import and export oriented (1.8 points), export related (0.5 point), and those that are import oriented (0.3 point) drove the positive business outlook in March 2020.”

Respondent firms identified insufficient power supply (65.6 points), competition (59.3 points), high interest rate (55.2 points), financial problems (55.0 points), unfavourable economic climate (54.6 points), unclear economic laws (49.8 points), unfavourable political climate  (46.6 points), access to credit (44.6 points)and insufficient demand (41.5 points) as major factors constraining business activity in the current month.

On inflation rate it stated: “Firms expect the average inflation rate in the next six months and the next twelve months to stand at 11.66 and 11.75 percent, respectively.”
On outlook on price changes respondent expected  rise in prices of goods and services in one year.

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https://www.vanguardngr.com/2020/03/consumers-businesses-confidence-in-economy-plunges/

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