Coronavirus has major impact on consumer confidence in March

The Current Situation Index (ISA) fell 4.8 points, to 76.1, the lowest level since July 2019 (75.6), while the Expectations Index (IE) dropped 9.3 points to 83.9, the worst result since December 2016 (81.6). As a result, the level of optimism has declined 16.4 points so far in 2020.
Economics
25 March 2020
Coronavirus has major impact on consumer confidence in March

Fundação Getulio Vargas’ Consumer Confidence Index (ICC) fell 7.6 points in March, to 80.2, the lowest figure since January 2017 (78.3 points), and down 11.4 points in the first three months of 2020.

“Consumer confidence had already dropped in the previous two months and the decline accelerated in March because of the coronavirus pandemic. Although two-thirds of the data for this survey was collected before the restrictive measures were imposed, it is already possible to note a significant impact on expectations. Out of all state capitals, Rio de Janeiro saw the sharpest drop in confidence, while the situation also deteriorated in Sao Paulo, possibly due to its large number of cases and its massive industrial base. The outlook for the coming months is worrying. There will be strong economic and social impacts. Although it is hard to imagine any recovery in confidence in the immediate future, we hope that the isolation measures will succeed in curbing the spread of the virus and this may contain part of the discouragement that will result from the drop in GDP and growth in unemployment,” said Viviane Seda Bittencourt, FGV survey coordinator.

In March, expectations about the present moment and the next few months deteriorated. The Current Situation Index (ISA) fell 4.8 points, to 76.1, the lowest level since July 2019 (75.6), while the Expectations Index (IE) dropped 9.3 points to 83.9, the worst result since December 2016 (81.6). As a result, the level of optimism has declined 16.4 points so far in 2020.

Among the items that make up ICC, the indicator that measures expectations about the economy in the coming months had the biggest impact on the drop in confidence, plummeting 12.0 points, to 104.9, the lowest level since September 2018 (100.6), in the run-up to the 2018 elections.

The increase in uncertainty generated by the fall in oil prices and the spread of Covid-19 in Brazil contributed to greater pessimism in relation to the future of the economy. Given that economic circumstances are likely to worsen in the coming months, consumers foresee a reduction in the supply of jobs and a deterioration in families’ financial situation. The indicator that measures prospects for household finances dropped for the third month in a row, falling 7.0 points to 92.2, the lowest level since June 2018 (91.5), when confidence was shaken by the truckers’ strike.

Confidence grew worse among consumers in all income groups, driven by heightened pessimism in relation to the economic situation in the coming months, apart from families with lower purchasing power (on incomes of up to R$2,100 a month), whose decline was driven by a sharp reduction in shopping intentions, which fell 9.9 points. Out of all income groups, the biggest reduction in confidence, 10.8 points, happened among households with a combined monthly income of between R$2,100 and R$4,800. “Although the biggest impact involved families’ economic expectations, there was also a deterioration in expectations of household finances and employment, especially for consumers with a family income of between R$2,100 and R$4,800. This directly affected their propensity to consume, which dropped 12.8 points, and their prospects of getting a job in the coming months, which decreased 10.1 points,” Bittencourt explained.

The complete study is available here.

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