Federal Statistics Service records growth of consumer confidence index

The consumer confidence index between January and March 2024 grew by 6% as opposed to October – December 2023, reaching 7%. Invest Foresight discussed the reasons with Igor Nikolayev, Chief Research Fellow of the Economics Institute at the Russian Academy of Sciences.

Igor Nikolaev, Chief Research Fellow of the Economics Institute at the Russian Academy of Sciences. Vladimir Trefilov / RIA Novosti

— The Federal Statistics Service recorded growth of the consumer confidence index. How reliable are these reports of a positive dynamic? 

— The consumer confidence index is calculated based on surveys where respondents answer about their inclination to make big purchases, expectations of business expansion and so on. Both individuals and businesses were polled to measure their consumer confidence and attitudes. The index also shows seasonal fluctuation. Attitudes are always better in the early months of a year.  

— Is it a psychological factor? 

— Yes, psychological. As the new year begins, most respondents obviously have more positive expectations than at the end of the year.

If we break it down by industries, the index also fluctuates between seasons, particularly when it comes to attitudes.

The message is, let’s not overestimate the index because it is based on opinions. What do you think? What are your predictions? What is your mood? People speculate about what will happen in the next few months and further down the road. Respondents still mainly hope for the better so, in my opinion, the consumer confidence index is always more optimistic than reality.

— Doesn’t it make it the index slightly useless? 

— Of course, not, it is not useless. It is very important to know and consider attitudes. Moreover, the index also reflects the state of the economic activity in society and among businesses. The results should be considered with care and a cool head.

— If consumer confidence is growing, are they ready to spend more? How else can the index be transposed to the real economy?

— Strong consumer confidence drives consumer activity unless there is an economic force majeure. Consumer demand is one of the key factors of economic growth.

— At the same time, the Central Bank occasionally notes that growing consumer activity creates inflation risks.

— It is true and the Central Bank is right. But it would be wrong to use this observation to claim that growing consumer activity is a bad thing. It does trigger inflation. And yet, consumer demand is not the only thing affecting prices. Prices in market economy form based on many factors. We can also influence inflation by increasing supply. The exchange rate of the national currency also contributes to the inflation rate. Therefore, positive consumer behavior and confidence in the future will not necessarily drive the inflation rate in any significant manner.

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