An Eye on the Consumers Confidence Index.

24 Jan, 2007, BRUSSELS

THE VW EFFECT. The consumers confidence index has suddenly dropped in December, waning back down to the pit out of which it had managed to slither since Q4 2005. This dramatic evolution is essentially due to unfavorable perspectives on the overall economic situation, and more specifically on employment. The spectacular downfall of the index is consistent with the announcement of a massive downsizing in the automotive industry, i.e. the considerable wave of dismissals taking place in the VW factory of Anderlecht. The index curve has already undergone similar depressions in the past, in response to similar phenomena, such as other losses of employment in the same sector (i.e. the Renault factory in Vilvoorde, back in 1997), terrorism (11/9), or the dioxin crisis in 1999. As shown by the curve (at the start of 2007, or for instance at the end of the year 2001), those temporary depressions are typically followed by a ski tow-like rebound that’s correspondingly dramatic, which somehow hands something of a consolation: the graph in January 2007 goes back indeed to the level it had reached in early 2006. As far as households are concerned, perspectives have shown discordant in December, with an expected slight degradation of their financial situation on the one hand, and their forecast regarding their ability to save money, which had significantly increased on the other hand. The first tendency has reversed in January, while the second remained stable (source: Consumers confidence index January 2007, graphic © National Bank of Belgium).

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