Ukraine greeted 2009 with a thus-far unseen worsening in the consumer mood as the crisis in the country’s economy worsened. In January 2009, the Consumer Confidence Index (CCI) fell a further 12.1pp over December 2008, to 41.8. This is a new record and the absolute lowest the Index has ever been since it began to be tracked. This level of the CCI indicates that more than three-quarters of Ukraine’s consumers are feeling pessimistic.

As before, all components of the CCI are registering a negative response since the beginning of 2009. What is unusual in the January survey is that economic expectations among Ukrainians are more positive than their assessments of the current situation. Thus, the Index of the Current Situation (ICS) fell 15.5pp to 40.4, while the Index of Economic Expectations fell only 9.8pp, to 42.8. In general, this means that people are somewhat inclined to see the current economic situation as worse than what it will be later. In short, the economic crisis in the minds of considerable share of the population of Ukraine has bottomed out and they now expect a gradual improvement in the situation.

The biggest decline among the components of the CCI in January 2009 was the Index of Current Personal Financial Standing (x1), which dropped 16.2pp to 34.5. In other words, the material standing of most Ukrainians has seriously deteriorated in the last while. The fall in the propensity to consume is an equally clear indicator: this index x5 dropped 14.9pp to 46.3. Thus, more than two thirds of those surveyed are no longer prepared to make major household purchases. This could signal a gradual depletion of the savings that Ukrainians had set aside during the period of economic growth.

The Index of Expected Changes in Personal Financial Standing (x2) shrank 13.6pp in January 2009, falling to 38.8. This means that Ukrainians assess their personal financial prospects extremely negatively. Nor are their expectations of the further development of the country’s economy any more optimistic. The Index of Expected Economic Conditions in the Country over the Next Year (x3) fell 8.3pp to 32.7, while the Index of Expected Economic Conditions in the Country over the next 5 Years (x4) fell somewhat less, 7.5pp, to 56.8.

Another important indicator is the minor improvement in expectations of unemployment among Ukrainian consumers. At the beginning of 2009, the IECU shrank a mere 0.6pp to 164.6. Although this is one of the highest indicators for the last eight years, such a minuscule rise as was registered in January could indicate that Ukrainians already expect a gradual stabilization in the economy rather than a serious worsening in the next while.

The Index of Inflationary Expectations (IIE) rose a modest 2.5pp to 186.2 at the beginning of 2009. This mild fluctuation in inflationary expectations can be explained as the result of contrary factors that cancel each other out. On one hand, the long-term devaluation of the hryvnia and its uncertain prospects have spurred inflation. On the other, the continuing fall in demand for most product categories has been reducing inflationary pressures in Ukraine. Still, the impact of the declining hryvnia relative to hard currencies in January 2009 has been stronger and has spurred inflationary expectations to grow somewhat.

Consumer Confidence is a survey of consumer households and their opinions about the current economic situation and their own financial standing. Consumer Confidence is a joint project of the International Centre for Policy Studies and GfK Ukraine. As of January 2009, the consumer confidence survey will be conducted on a monthly basis. The Consumer Confidence Index is the main indicator used around the world to determine trends on consumer markets. This indicator is also the basis for many companies who sell consumer goods and services to make business development plans.

Consumer Confidence was launched in July 2000 and is published in both Ukrainian and English. Subscribers include Ukrainian and foreign companies, diplomatic missions, Government offices, and postsecondary educational institutions.

For more information, please go to:
http://www.icps.com.ua