After five months of consecutive decline, the consumer confidence index has finally increased – albeit only slightly. Although the insignificant (0.9 point) increase of the CCI can be classified as a stabilization of the index at the low point of the previous month, looking at the structure from different dimensions still offers insights into changes in consumers’ concerns over the month.

From the regional perspective, the increase in economic activities resulting from the planting season has been translated into an increase of the CCI in the regions. The reasons for the growth of activities in the agricultural sector include: (i) the 2015 land cultivation support program for small farmers, which includes free plowing of land; (ii) a new support program, “plant your future”, that provides financing in terms of subsidies for fruit gardens and nurseries. In contrast to developments in the regions, the consumer confidence index in Tbilisi has decreased further. This is likely caused by tensions in local politics, as well as delays in road maintenance works that has deepened problems with traffic jams. In addition, Tbilisi is more vulnerable to changes in the overall economic performance of the country. The government has revised its economic growth forecast and decreased it to 2.5% – which is reflected in consumer dissatisfaction in capital. Lastly, it is important to note that the differences between the two components of consumer confidence – the present situation and expectations indices – have significantly increased over the month.

Overall consumer confidence slightly increased in April 2015, reaching -35.1 points (an insignificant increase of 0.9 points). The present situation index increased to -44.9 points (a slight increase of 0.5 points), while the expectations index had a relatively more solid increase to -25.3 points (an increase of 1.3 points). The pattern of changes in these two indices proves that the small increase in overall consumer confidence index was primarily driven by developments in the agricultural sector of the economy.

Comparing the CCI in annual terms still reveals very bad results. There has been a -23.8 point decrease compared to April 2014. Interestingly, this is a larger decrease than in March 2015. April is typically a month where consumer confidence increases, however this year’s increase has been smaller than it was in April 2014, which is why the annual decrease is larger this month. The present situation index has decreased by -31.3 points in year-on-year terms; while the expectations index has fallen by -16.2 points. From the regional perspective, annual changes have been observed between Tbilisi and the rest of Georgia. These changes support the aforementioned reasons for the changes in consumer confidence as well as also indicating that consumer confidence is stabilizing at a certain low level – something that might not be beneficial for the country’s economy.

A few things to note:

• The answers given to the separate questions of the consumer confidence survey reveal some interesting characteristics. Fewer people overall thought that it was a good time for making major purchases, with 22% of respondents stating this in March as compared to 28% in February. Furthermore, only 15% of respondents expected to increase the amount of major purchases they would make, while 20% anticipated the same a month earlier. There were also several significant improvements. In March, 17% of respondents expected higher inflation, while 29% thought the same in February. Another improvement concerns the current financial situation of households. In March, 56% answered that they were running into debt, while 63% gave the same answer the previous month. Although this number remains very high, the improvement is significant.
• Looking at the survey’s results in terms of the education level of the respondents reveals some interesting changes. In March, a greater number of respondents without higher education stated that the economic situation in the country had worsened in the past 12 months. In March, 68% thought that the economic situation had worsened; while 56% thought the same in February. Furthermore, only 14% of respondents without higher education thought that it was a good moment to make major purchases, while 22% thought so a month earlier. On the contrary, there was an improvement in the answers to a number of questions for respondents with higher education. In March, only 15% of such respondents thought that prices would increase more rapidly in the next 12 months, while 24% gave the same answer in February. Moreover, 44% of respondents with higher education stated that they were running into debt, while 60% gave the same answer in February. Although such results remain extremely concerning, the extent of the change is significant.
• Answers to the question regarding the current financial situation of respondents changed significantly for younger respondents (aged 35 or younger). In March, 54% of younger respondents answered that they were running into debt, while 64% gave the same answer in February. In contrast, there was a worsening of responses to the question regarding making major purchases from older respondents (aged over 35 years). In March, 19% of these respondents thought that it was a good time for making major purchases, while 28% gave the same answer a month earlier.
• From the gender perspective, female respondents were again characteristically cautious. The CCI moved in different directions for male and female respondents. For male respondents, consumer confidence increased by 1.4 points (reaching -32.7 points), primarily due to an insignificant decrease (of 0.8 points) in the present situation index and a relatively large increase (of 3.6 points) in the expectations index. In contrast, the CCI for female respondents decreased by 2.4 points (reaching -39.2) – with the present situation index again showing a large decrease (of 5.1 points); while the expectations index increased slightly (by 0.3 points). Looking at male responses to separate questions reveals some small improvements, especially to those regarding the current financial situation of households and the expected change in price levels. On the contrary, female responses worsened, especially concerning the question regarding making major purchases. In March, only 20% of females thought it was the right moment to make major purchases, while 28% thought the same in February. This once again proves that female respondents tend to be more cautious.

Regional Peculiarities

In March, the consumer confidence index moved in different directions for Tbilisi and the rest of Georgia (RoG). The overall index increased by 1.4 points (reaching -32.1 points) in Tbilisi and decreased by 1.5 points in the RoG (reaching 38.4 points). The growth of the CCI in Tbilisi was primarily caused by a large increase in the expectations index (of 4.7 points), while the present situation index decreased in the capital (by 2 points). In the RoG the present situation index decreased substantially (by 3.3 points), while the expectations index showed hardly any change (an increase of 0.2 points). The results indicate that the improvements in expectations were a result of changes in the capital. Furthermore, the relatively small decrease in the other components of the index indicate that the CCI will likely stabilize at a low level.

A comparison of the responses to separate survey questions reveals some essential differences between the capital and the RoG. Major differences are found in answers regarding major purchases, expected price changes and unemployment, as well as the current financial situation of households. In Tbilisi, 28% of respondents answered that it was the right moment to make major purchases, while 19% gave the same response in the RoG. Furthermore, 21% in the RoG thought that prices would rise more rapidly over the next several months, while only 12% gave the same response in Tbilisi. As for expected unemployment, 20% in Tbilisi thought that it would rise sharply, while 27% gave the same response in the RoG. Lastly, socio-economic differences between Tbilisi and the RoG are clearly captured in the responses to the question regarding the current financial situation of households. In Tbilisi, 49% of respondents stated that they are running into debt, while 60% responded in the same way in the RoG.

Compared to February, the situation in Tbilisi improved in responses to a few questions. Most significantly, fewer respondents from the capital thought that prices would increase more rapidly in the next 12 months. In March, only 12% thought that prices would increase, while 31% thought so in February. This is clearly a result of the stabilization of the national currency’s exchange rate against the U.S. dollar. Another notable improvement is seen in the assessment of the current financial situation of households. In March, 49% of respondents from Tbilisi answered that they were running into debt, while 58% gave the same answer a month earlier. On the contrary, only 28% of respondents from Tbilisi thought that it was the right moment to make major purchases, while 36% thought so in the previous month.

The situation in the RoG did not change significantly over the month. In March, 21% thought that prices would grow rapidly over the next 12 months, while 27% thought the same a month earlier. Another change in responses in the RoG regarded major purchases: in March, 19% of respondents thought that it was the right moment to make major purchases, while 25% thought so in February.