Analysts: Consumption starting to fall, confidence lower than 2008

Rasmus Kattai.
Rasmus Kattai. Source: ERR

Consumer consumption levels have started to fall and turnover is declining, a Bank of Estonia analyst said on Friday. Uncertainty is now higher than it was during the 2008-2009 financial crisis and coronavirus pandemic.

Sales of home appliances and electronics in September were lower than in the same period last year, electronics store Euronics sales manager Jan Andre told Friday's "Aktuaalne kaamera" (AK).

Last year, sales were higher due to money being paid out from the second pillar pension fund.

"September's numbers, of course, can be looked at in two ways. How they are in the context of this year and how they are versus last year, because last year, as you know, there was the pension reform and that, of course, had a big impact on trade and on people's buying," Andre told AK.

Additionally, the price of household appliances has risen by 14 percent compared to 2021. However, necessary white goods, such as washing machines, are still purchased.

"People are a bit wary and are certainly not making spontaneous purchases, they are weighing things up," said Andre, adding the drop is sales has been noticeable.

Electrical goods have risen in price by 14 percent. Source: ERR

Sales were down 1 percent compared to August, adjusted data shows.

However, Motonet department store manager Tomi Ranta told AK sales are still good.

"The authorities have encouraged people to stock up on things and goods so that they can be self-sufficient for a period of time [in an emergency], and that has created a huge demand for generators, for example," said Ranta.

But after six months of above 20 percent inflation, which wages cannot match, consumption has been affected, Bank of Estonia Economist Rasmus Kattai told AK.

"For some time now, people's incomes have been growing more slowly than prices. This has put a brake on consumption. On the other hand, we see that in the autumn months, people's confidence has also been hit hard, with uncertainty becoming even greater than it was during the financial crisis of 2008-2009, and also during the corona [pandemic]," he said.

Consumption will continue to fall.

"Prices will remain high, which will reduce people's purchasing power, and consumption will be increasingly constrained by further increases in interest rates and borrowing," said Kattai.

Turnover starting to fall

Turnover declined by 6 percent — €886 million — last month compared to 2021, according to data released by Statistics Estonia.

Purchases saw industrial goods fall the most, by 22 percent, followed by household goods, building materials and clothes. Grocery store sales decreased by 4 percent.

Meanwhile, sales of gasoline and second-hand goods increased.


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Editor: Merili Nael, Helen Wright

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