In December 2007, the consumer confidence index rose 5.2 points compared to October, which nearly covered the decline in the index during the autumn and brought it close to the previous peak in August. The index stood at 100.2 in December, according to the study.
“The revival of optimism in the consumer mood among Ukrainians at the end of 2007 appears to have been largely spurred by the return of political stability in the country, the start of work of the newly-elected Verkhovna Rada, and the formation of a new Cabinet,” the report claims.
Confidence highest in boom town Kyiv
The index was determined through a random survey of domestic households. The poll involved 1,000 people aged 15-59, an age group representing 61.3% of Ukraine’s population and containing the country’s most active consumers. This representative sample was selected by gender and age, also by type and size of settlement. The margin error is 3.2%. The most optimistic changes were recorded in major cities, primarily – and traditionally – in Kyiv, whose residents registered a record 131.9 and in the west of the country where a more moderate level of 111.9 was recorded.
Consumer confidence improved across all age groups and all income levels during November-December 2007. The mood among young Ukrainians improved most noticeably, rising 9.3 points to 111.1 and among poorer consumers jumping 16.7 points to 89.
“(Prime Minister Yulia) Tymoshenko is known as a strong advocate of a wide social policy. She increased wages, student scholarships, pensions, and is compensating people’s Soviet-era lost savings. People are sure their incomes will grow, that the economy and social situation will get stable and they will feel more confident,” comments Vasyl Yurchishin, an analyst with the Razumkov Centre for Economic and Political Studies, a Kyiv-based think tank.
“Indeed, the rate of salary growth now is estimated to be higher than the country’s inflation dynamics. However, I don’t see anything else but social efforts from the government so far to improve consumer confidence,” he adds, stressing that the government is supposed to do more to follow economic reforms, including those required by the WTO to maintain Ukraine’s good progress in this regard.
South and east react negatively
However, confidence is not on the rise everywhere, and this latest research paper noted a slight worsening in consumer mood in mid-sized cities and among rural consumers, as well as in the country’s north (90.5), south (90.9) and east (90.6).
“This divergence can partially be explained by people’s political sympathies. The previous government of Viktor Yanukovych enjoyed overall support in its stronghold, the east, particularly in the Yanukovych bastion of Donetsk as well as in the country’s south. His supporters were obviously frustrated by the change in political hue of the government, which is now mostly Orange,” Yurchishin comments.
The general dynamics of consumer confidence has been positive throughout the past eight years. The index has risen 35 points since 2000, from 65.2 to 100.2. The highest index (107.3 in March 2005) was observed shortly after reformer Viktor Yushchenko came to power following the Orange Revolution. This high water mark dropped to 95.5 in September 2005, after the government of Yulia Tymoshenko was dismissed, bringing to an end the feel-good political mood following the Orange Revolution.
Expectations remain high
Also, the research noted that the index of economic expectation rose 5.1 points to 99 throughout Ukraine, with the biggest shift in short-term expectations, where the index jumped 11.8 points to 96.6.
At the same time, inflationary expectations did not change much among Ukraine’s consumers. The study noted a persistently high index of inflationary expectations, 182.7, even although it slipped 2.9 points during November-December.
“It is difficult to scare Ukrainians with growing inflation – we’ve gotten used to that,” says Yurchichin.
