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Weak consumer confidence: perception vs. reality

According to the August consumer poll by the National Bank of Belgium (NBB), spring’s increased consumer optimism fell back to the level of depression in February, mostly due to uncertainty about employment. This uncertainty, however, does not correspond with reality.

The warning by the Governor of the National Bank of Belgium (NBB), Luc Coene, that the Belgian economy is bound to shrink further during the third quarter of 2012, appears to become real. Uncertainty about the labor market and the euro-crisis is hampering household consumption in Belgium and impeding economic revival.

Perception

The drop-back in consumer confidence can be seen from the chart below. The media coverage of Governor Coene’s and other economists’ predictions of a looming recession in Belgium and other European countries and the need for new measures to keep the budget on track contribute to the instability of consumer confidence. The most problematic issue in the eyes of consumers, however, is employment prospects. More and more Belgians are worried about their job, fearing that companies will be forced to restructure due to the worsening economic climate. The image that Belgians have of the labor market is bleak, fueled by recent reports on (possible) layoffs with Arcelor Mittal and Bekaert.

Reality

In reality, however, the unemployment rate in Belgium has not seen a significant increase during past months. Moreover, the recent layoffs are largely offset by a vast number of vacancies. Dredging companies, such as Jan De Nul and DEME are desperately looking for new employees, while some companies are even giving bonuses to employees who recruit new workers for vacant positions within the company.

The real issue for the economy in Belgium is thus “finding the right person for the job” and getting people to work. According to Fons Leroy, Managing Director of the Flemish employment service VDAB, Belgium will soon face real problems if it is not able to put its unemployed workforce to work, especially when it comes to older workers (55-plus) and immigrants. “In Sweden it his normal that an unemployed 64-year old retrains himself in order to get a new job,” Leroy says. “In Belgium, people frown when a person over 60 thinks about vocational training. What Belgium really needs is a change of mentality.”

AmCham Belgium’s position

The results of the latest consumer poll by the National Bank of Belgium are distorted by consumers’ hypersensitivity to recent news on layoffs and restructurings. Compared with the actual situation on the labor market, the drop in consumer confidence seems exaggerated. The reality is, however, that the uncertainties about employment and the economic crisis have a real negative effect on the Belgian economy, as people tend to postpone consumption. Therefore, the government must put everything in place to enable the economy to bounce-back from the crisis. Improving workforce participation should be a good first step. To see AmCham Belgium’s recommendations for increased workforce participation, please see the 2012 Priorities for a Prosperous Belgium.

 

 
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