After the sharp fall of consumer confidence that started from November 2014, the index showed only a comparably slight decrease in March. This might be a sign of the CCI’s stabilization at a low level. The present situation index decreased, albeit less than in the past several months, while the expectations index improved – primarily because of higher economic growth in February.

According to Geostat’s preliminary estimates, growth in February reached 4.9%, which is the highest level seen in several months. This is a clear reason for the improvement in consumer expectations. In addition, the GEL/USD exchange rate has stabilized at around 2.2. However, despite there being some positive changes in the CCI, especially in the expectations component, overall consumer confidence remains at a very low level. What does this imply for the Georgian economy? (i) A significantly negative consumer confidence index indicates that business activity will be lower; (ii) decreasing demand might limit businesses from raising prices and may even decrease margins; and (iii) investors interested in starting business activities directed towards the local market might abstain from making such decisions.

The overall consumer confidence index exhibited yet another decrease in March 2015, falling to -36 points (an insignificant 0.4 point decrease). The two components of the consumer confidence index moved in different directions. The present situation index decreased to -45.4 points (a decrease of -2.7 points), while the expectations index increased to -26.6 points (an increase of 2 points).

In year-on-year terms, the overall CCI decreased by -22.3 points, which is a smaller decrease than in the previous month. An annual decrease has been observed for both the present situation and expectations indices. The present situation index decreased by -29 points compared to March 2014, while the expectations index fell by -15.7 points compared to the same period a year earlier. As the annual decrease in March was smaller than in past months, and the expectations index has actually shown a monthly increase, this might all be a sign of the stabilization of the index at a low level over the next few months.

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. In March, 22% of respondents thought that it was the right moment for major purchases, while 28% thought so in February. Furthermore, only 15% of respondents expected to increase the amount of major purchases they 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 debts, while 63% gave the same answer in the previous month. Although this remains a very high number, the improvement is significant.
• Looking at the survey’s results in terms of the education level of the respondents reveals some interesting changes. More 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, the answers to a number of questions improved 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 debts, 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 years or younger). In March, 54% of younger respondents answered that they were running into debts, 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 (older than 35 years). In March, 19% thought that it was a good time for 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). The present situation index again showed a large decrease (of 5.1 points), while the expectations index increasing slightly (by 0.3 points). Looking at male responses to separate questions reveals small improvements, especially to questions regarding the current financial situation of households and the expected change in price levels. On the contrary, female responses have worsened, especially concerning the question regarding major purchases. In March, only 20% of females thought that it was the right moment to make major purchases, while 28% thought the same in February. All this proves once again that female respondents are typically more cautious.

Regional Peculiarities

The consumer confidence index in March 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 show that the improved expectations were a result of improvements in the capital. Furthermore, the relatively small decrease in the other components of the index indicate that the CCI will likely stabilize on 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 debts, while in the RoG 60% responded in the same way.

Compared to February, in Tbilisi the situation improved in responses to a few questions. Most significantly, 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 debts, 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.

In the RoG the situation 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.