Spain’s Incredible Consumer Confidence Index

According to Spain’s Instituto de Crédito Oficial (ICO) the ICC-ICO (consumer confidence index) went up in January by 6.1 points from its December value and is now at its highest level since August 2009. This confidence improvement is largely due to a significant rise in the Expectations Indicator (+5.7 points) and to a smaller one in the Current Economic Conditions one (+2.3 points).

As can be seen from the chart below, confidence while up, is not exceptional by historic standards, which is hardly surprising given the deep recession which Spain is in.

What is really striking – nay astonishing – is that when you come to look at the breakdown of the index into its components (see chart below) you find that the bulk of the work is being done by the expectations indicator, which at 108.5 is now showing its second highest reading ever, and only just below the all time series high of 109.7 which was hit back in the heady days of January 2005! (The indicator series only goes back to September 2004).

This is not only incredible, it is extraordinarily hard to understand. Even those who doubt that the situation is quite as bleak as people like me argue it is must surely admit that Spain now faces a difficult and testing time. My contention is not that there is anything wrong with this finding, but rather that this is how Spanish people actually think at the present time. They have no idea of the actual economic reality, or of what the future has in store for them. They are virtually being kept in the dark. This is the worrying part, and I fear that all this may well now end badly, very very badly.

This entry was posted in A Fistful Of Euros, Economics: Country briefings by Edward Hugh. Bookmark the permalink.

About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

14 thoughts on “Spain’s Incredible Consumer Confidence Index

  1. The Greeks don’t pay their taxes; they’ve got the Germans working for them. Why not Spain, too?

  2. After the 4 million unemployment figure and the pension ruckus, next mnoth’s figure may well be lower. It’s still amazing, though

  3. When 20% of the economy is underground, and you’re legally unemployed, but illegally employed, thinks do not look so bleak.

    Additionally, the unemployment benefits last (in the longest scenario) two years, so Spanish people accept economic troubles two years later.

  4. In Spain the polls lost value with the arrival of the Socialists to power. It even handled the actual number of unemployed, who actually reaches 5,400,000.

  5. Pingback: Real Madrid y Alcoyano « Un caballo de cartón

  6. Im spanish and I sadly understand this notice.

    Spanish society (in general) its blind. Or better said, its stupid. The govern ment is still in his ideal world, in his happy meal world. Our president is only words, but no actions at all. And the opposition is as bad as the government. Political class is infected by stupidity.

    There arent strikes because the workers associations are “friends” of the socialists. If conservatives were in power, would have been hundreds of strikes.

    In addition, the media in spain isn’t objective so people don’t realize whats going on.
    This country needs a BIG change.

  7. Spainish people doesn’t understand really economics. You can see that in Pablo’s commentary, he said, and many people in Spain is saying that too, “There arent strikes because the workers associations are “friends” of the socialists”.

    But a strike for what? All the experts thinks Spainish Govermment fails about make cuts on social welfare , so what do you expect from the Workers Associations? A rally asking for less worker’s rights? (And Socialist Party, which is more a center party than left winged, is the political party with more General Strikes in his CV in the democratic history of Spain, by the way).

    Another important factor is people is starting to lose his faith in the economics indicators, just as happen in Argentina in the aftermarth of its country crisis. We have a govermment who has spend many years tell them the indicators are OK yes, but they spent many more years listening the spanish economics was a “miracle”, a miracle based in the real state speculation that now is totally crashed, and now they are facing that importante bussinessmen tell them they are lazy and no competitive as the third world workers are.

    Spanish people have to choose where they put their faith in a govermment who shows day by day fear and no real ideas, a conservative party with strong internal fights and two corruption scandal in a year or a bussinesmen leads by a man in bankruptcy who was selling airflight tickets all november only for closing his airline in Xmas, and the only public statement he made was “If I was a passanger I wouldn’t choose my company”.

    So, can anybody blame the spanish people for living day by day as if there was no future?

  8. Well, its true that in general we don’t understand of economics. (I dont, and i shouldn’t have wrote about things that i don’t know, but im sorry, im a human being)

    But its not only economics…its everything. And its not only spain, its mostly all europe. We reject our roots (cristianism) and its moral. We are an ill society. And our president its on that way.

    Economics can go better or wrong, but until we make up our minds, we won’t progress. We are in similar situation to the old rome…

  9. Hmm – given that economic expectations can very often be self-fulfilling prophecies, and the fact that the average spaniard is likely to have better information about his or her prospects than you or I.. Going to go out on a limb and categorically state that a; this is good news. B: Things will work out much better for Spain than you expect, if not as well as the spaniards expect.

  10. The actual number of unemployed depends on the method used to count them. It’s the same in all countries. For example, in the USA, where the actual number of unemployed is higher than commonly accepted, maybe around 20%. The same happens to all indicators, some of them are nothing more than statistical artifact, i.e. GDP.
    And yes, the problem with our economic way to paradise was too much residential building. The reason investors came was good weather, excellent and inexpensive health care, splendid food and the expectation of a profit. The risky side of that bet was that the crisis all over Europe could suck the money away, as it did. Meanwhile, we spent too much of the windfall of german marks (Remember when the european funds where negotiated, in exchange for our support to Kohl’s policies?) on infrastructure. We have built more infrastructure than any other single country in Europe, so we cannot get much traction from there now. Besides, it’s bad for the environment, and it drains resources from other sectors.
    Anyway there is a growing concern in Spain that dark forces might be trying hard to make money with our downturn, and this is truly dangerous. Soros took the Pound out of the eurpean system without much effort.
    I think the time has come for a government of great coalition.

  11. You have a very strange way of reading a graph!
    According to the lines in the graph Expectations have always been up there holding the numbers for the composite of the Confidence Index. I simply do not see what surprises you in this month of January that did not surprise you in the previous 60 months. The gap between that indicator and the others has been the same in the last 12 months. Seeing this what I find surprising is that you brand yourself as someone who “knows something about reality” as opposed to those that do not. Evidently you don’t even know to read a simple graph how on earth would you understand what happens around you.
    Here, read this to find out why spaniards have confidence and good espectations:
    http://estaticos.elmundo.es/documentos/2010/02/08/tesoro.pdf

  12. Mr. Souto, it was actually Portugal who built more roads/km2 with the EU funds, if that’s what you mean by “infrastructure”.
    The thing is that it allowed Spanish produce to arrive faster on Portuguese supermarket shelves.

    No other “infrastructure” was developed. In fact, railroads were close (and DISMANTLED), forcing the few brave ones that used it to switch to car, with all the subsequent environmental damage.

    At least in Ireland there was no “miracle” based on short-term gains, like roads or housing, like in Spain or Portugal. Even if they are in crisis now, since their EU funds were spent on Education and R&D, now they still have something that perdures, which is an educated, highly specialized workforce. Knowledge doesn’t wane, and Ireland still keeps many “excellence clusters”. Spain has… well… sun and beaches… and… tasty (if fatty) food!

  13. A pleasure to meet you, Mr Serranho.

    Knowledge doesn’t wane, but it becomes rusty when underused, or, more likely, it migrates; go ask in eastern Europe.

    Beaches in Portugal are too windy. You wind up eating sand.

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