Danish Confidence Continues Near Multi-Year Lows

Danish confidence improved again in January marking the third monthly improvement in a row; however, the index has still been weaker only 1.2% of the time and its history back to 1995 marking the January reading as a still exceptionally weak reading. Like elsewhere in the world, Danish confidence had been negative but really took a tumble in March at the time the Federal Reserve in the United States began raising rates. In February 2022 Danish confidence had been -3.2; in March it fell to -14.4 then quickly dropped in April to -20.9. The index remained weak and skidded to a low at -37 in October 2022, and it has been gradually improving from that low-point.

Changes in monthly consumer component readings In January, the past and future financial situations are beginning to score somewhat improved results as the financial situation over the last 12 months improved in January by 4.7 points, building on a gain of 1.5 points in December. The look ahead reading for the next 12 months is up by 4.1 points month-to-month after falling by 0.4 points in December.

The past general economic situation has been improving slightly from November and December and that continues in January albeit at a stepped down pace. The expectations for the future stepped up in November, scoring a strong 12.2 gain compared to a 1.9-point drop in October. It continues to improve, logging a 0.4-point increase in December and moving up to a 5.4-point gain in January.

The development of inflation has begun to get some negative responses indicating that there are some expectations that inflation will be rolled back. The reading for December fell by 1.8 points, in January it fell by 8.2 points; these are backward looking reflections for the last 12 months. Looking at 12-months ahead, November shows a 12.5-point drop, December a 7.3-point drop, in January a 10.1-point drop indicating that there is a substantially entrenched view that inflation is going to be brought to heel. At the same time, concerns about unemployment have dissipated slightly, unemployment concerns have jumped, posting a change of 14.2 points in March, as the Federal Reserve in the U.S. was hiking rates. The next biggest increase came in October 2022 at an increase of 13.4 month-to-month but that was followed in November by a slip of 5.6 points. December then brought an increase of 4.6 points, but January now brings us a negative change of -2.9 points. Clearly Danish consumers are beginning to vacillate about whether the future offers them better or worse unemployment conditions for the 12 months ahead.

After a string of negative changes and two-months of improvement, the backward-looking assessments on conditions for making a major purchase, deteriorated in January. The forward-looking responses, however, have improved for three months in a row, gaining by 2.6 points in January, building on a 4.2-point gain in December and a 1.7-point gain in November.

The ability to save over the past 12-months as well as over the next 12 months shows improvements in both December and January.

The general financial situation shows improvement of 3.4 points in January after a decline in December; that followed two months of improvements. It's hard to call any of this a lasting trend. Consumers still seem to be trying to puzzle out where things are going.

The rankings on the level of the responses in January provide the bottom line on where consumers stand. The consumer confidence indicator has been weaker 1.2% of the time, the financial situation over the past 12 months, over the next 12 months and the general economy situation over the last 12 months all have standings in the lower 5% of their queue of historic values. The look-ahead for the economy over the next 12 months shows some improvement with a nearly 18 percentile standing; that's better than a lower 5 percentile standing, but still not impressive. Consumer prices over the last 12 months have a 97.6 percentile standing, indicating there has been a lot of inflation. Over the next 12 months, that standing is down to 25.2%, indicating that an abatement of inflation and a decline in inflationary pressures is more widely anticipated. However, the unemployment trends over the next 12 months continue to have a high 94.5 percentile ranking, indicating that there are concerns that there will be an unemployment price to pay for getting inflation under control.

The current favorability of the environment for spending is in its lower one percentile. Looking ahead, to the next 12 months, it's still only in the 1.2 percentile of its queue of historic data. Favorability to save both in the past 12 months and the forward-looking 12-months is near its median at a 47-percentile standing. The general financial situation for households has a lower 5 percentile standing - extremely weak.

On balance, we can mark the Danish consumer as concerned about the economy thinking that inflation is going to be repaired probably, at some gradual speed, and that the risk is that they're going to pay an unemployment price to do that. Consumer spending is going to take a hit as indicated by consumer responses in this survey. Of course, we still don't have much of an inkling of how severe the economic slowdown will be or how long it will last, but the survey gives us some exceptionally low readings. There is no reason, after looking at this survey, to be confident about the future in Denmark except to the extent that consumers see inflation dissipating, but at a cost.