Consumer confidence plummets in March and April, consumption on the rise

The consumer sentiment, the indicator relied on by companies the world over when devising sales objectives, fell sharply in March and April after achieving record highs over the last four or five years.

On the other hand, consumption and lending are constantly on the rise, stimulated by the announced interest rate cuts.

The consumer sentiment barometer conducted by the GfK Romania, a research institute, following a similar model used in all European Union and other applicant states, fell drastically in the first three months of this year, after having seen its highest level in January since calculation of the index began in the spring of 2001.

The coming elections induced a gradual increase in Romanians” confidence, with the announcement of the flat tax helping the indicator to peak in January. With the prospect of higher wages ahead, Romanians felt very optimistic.

The introduction of new taxes and the increasing of the existing taxes, however, as well as the reintroduction of excise duties for products that had been excise-free, caused consumer sentiment to plunge within the space of only two months, with all the gains of the last year being lost, GfK Romania data show.

Traditionally, a decline in people”s confidence translates into a decline in consumption at a later time and a reluctance to borrow. The Romanian paradox, however, meant that consumption went up at a steady pace, with loans playing a significant part in this. Practically, official statistics say, retail trade in Romania rose by approximately 20% in the first few months of the year compared with 2004.

“It is a matter of a generalised growth, instead of only specific product categories,” said Andreea Mihai, marketing manager with Carrefour Romania, a company that runs four hypermarkets in Romania.

She says Carrefour”s sales went up by 20-35% in the first quarter this year for the hypermarkets the companies already had in the first quarter of last year.

“The growth is chiefly due to the fact that Romanians are still in the home fitting stage,” Mihai explained.

An important factor in the increased sales came in the form of the announcements of excise rises for certain products, such as digital cameras.

“Last but not least, the reduction of profit tax also made a contribution,” Mihai added.

The situation is the same for companies in the construction supplies industry, where investments in interior decorations are becoming increasingly more important.

“Since the beginning of the year our sales have been very good, compared with the same period last year. We have no information as to how things were for the overall market,” said representatives of the paint and enamel maker Dufa Romania, one of the top three players on the market.

However, as shown by the GfK Romania data, 90% of Romanians say they are not going to buy or even build a home in the next 12 months, a percentage that has maintained almost unchanged for the last four years.

ionut.bonoiu@zf.ro