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Akava’s Chief Economist: Consumers’ outlook for the future may be too bleak

News article

Akava’s Chief Economist Pasi Sorjonen estimates that Finland's economic growth will stall this year. TEK’s CEO Jari Jokinen still encourages investments in sustainable growth.

In an economic forecast (in Finnish) by Akava Works, the outlook for 2023 looks quite grim. According to the forecast, prepared by Akava’s Chief Economist Pasi Sorjonen, the weak development of the Finnish economy will continue and economic growth will stall. Europe is heading for a brief recession.

According to Sorjonen, companies are expecting the economy to contract this year, but not very sharply. Consumers’ outlook for the future, on the other hand, may even be too bleak.

Despite the fact that the times we are living in and the confidence are now poor and the outlook is unclear, we need to maintain confidence in the long run and invest in sustainable growth even now.
- Jari Jokinen

“It’s puzzling to see lower levels of consumer confidence now than at the start of the COVID-19 crisis or the financial crisis. Their confidence is the lowest ever in the measuring history,” said Sorjonen at the forecast publication event.

“I don’t want to underestimate the distress that consumers feel, but it’s hard to believe that we are heading for a slump that is worse than the one during the COVID-19 crisis.”

According to Sorjonen, the indexes describing the buying intentions of purchasing managers, for example, predict a fairly moderate decline in production in the next few months. Other economic indicators have also remained fairly positive.

On the other hand, it is easy to see the reasons behind the weak consumer confidence in the economic forecast. First of all, household purchasing power has fallen sharply as the high inflation has turned consumers’ real earnings negative. For example, the index of wage and salary earnings, which measures the average rise in wages and salaries, rose by 2.7 per cent from July to September when compared with the respective period one year ago, but consumer prices rose much more than this, 7.8 per cent.

The labour market also looks like it might be taking a turn for the worse. The number of people who had been unemployed for less than six months was more in October than at the same time a year ago. Sorjonen estimates that the unemployment rate may rise to 7.4 per cent next year.

Conflicting emotions

CEO of the Academic Engineers and Architects in Finland TEK Jari Jokinen observed in his invited commentary speech that the forecast causes somewhat conflicting emotions, considering that the unemployment rate of TEK members is currently 2.8 and the economic situation of industrial companies appears stable.

“The outlook is positive in the sense that the labour shortage issue is constantly under discussion. I can’t help mentioning that at this very moment collective agreement negotiations are underway in our key area, the technology industry. As someone not sitting at the negotiation table, it appears to the outsider that the depression starts right about the time when the negotiations begin and ends when the paperwork is signed.”

Nevertheless, Jokinen argues that we should not focus too much on the short-term outlook.

“Despite the fact that the times we are living in and the confidence are now poor and the outlook is unclear, we need to maintain confidence in the long run and invest in sustainable growth even now.”

Akava Works is a think tank and a research unit operating under and funded by Akava – the Confederation of Unions for Professional and Managerial Staff in Finland. Akava has 36 affiliates, of which the Academic Engineers and Architects in Finland TEK is the second largest.