Among the Asian economies tracked by Morning Consult, changes in consumer sentiment were split down the middle last month. In six of the twelve countries, consumer sentiment increased in July, while in the remaining economies, they fell. Pakistan and Thailand had the largest drops in the region. In fact, Pakistan had the highest month over month percentage drop among the 43 countries Morning Consult tracks. The precarious economic and political environment in the country have crystallized in the data, as consumer sentiment began sliding in mid-June. Although Pakistan’s annual inflation slowed from 30% in December 2023 to 11.8% in May 2024, it once again ticked up in June and is expected to rise in July, in part due to increases in fuel taxes. Despite reaching an agreement with the IMF in July and getting assurances for foreign direct investment from China, Saudi Arabia and the U.A.E, Pakistan is still very heavily debt burdened. Furthermore, the recent political tensions are adding on top of the economic worries Pakistanis have been experiencing.
The monthly changes in Europe show more greens than reds and some of the increases are quite large: Consumer sentiment dropped in only five countries among the sixteen tracked by Morning Consult with the largest consumer sentiment increase coming from the United Kingdom. Despite the volatility in the spring, sentiment in the U.K. has been on an upward trajectory since the beginning of the year. Especially after the elections, sentiment increased significantly and steadily from July 5th to July 16th (See U.K. tab, 6m range). Post election giveback was exacerbated by the stabbing attacks at the end of the month. However, since the bar chart above takes an average, we still observe the July figure as a large uptick. As our colleagues in Morning Consult political intelligence note, tackling the recent riots will take time and will probably drive down sentiment more in August.
In the Middle East and North Africa, consumer sentiment dropped in Turkey, rivaling the magnitude of Pakistan. In month over month terms, consumer sentiment decreased 8.0% in July and the slide continues in August. In June, the annual inflation rate came in at 71%, slightly slower than the 75% in May. Despite the deceleration, the inflation rate is still very high, and according to the Istanbul Chamber of Commerce (ITO), it was 82% in Istanbul, the largest city in Turkey. Inflation- especially at these high rates – coupled with interest rates at 50% and a recent increase in electricity prices – is wearing down the Turkish consumer and it shows in the data. Consumer spending is moderating and economic growth is expected to slow down as well. Turks would need to see some better economic news – especially on the inflation front – before sentiment bounces back up again.
Although declines were not as steep as in Turkey last month, Nigeria is still plagued with falling consumer sentiment. In fact, it is the only country among the 43 countries that has had a double digit drop in sentiment relative to last year. Nigeria’s CPI stood at 34.5% in June and relative to last year, its currency has depreciated significantly, after the peg to the U.S dollar was removed in May 2023. These two factors are driving down the sentiment towards its last trough in February this year.
Sentiment in North and South America generally improved over July, with the exception of Brazil and Peru. Similar to monthly changes, in year over year terms, sentiment is lagging in these two countries. The Brazilian real is the third worst performing currency among emerging market economies, following Turkey and Argentina. The fiscal risk is keeping investors on edge and at times spooking the markets.
The stock market volatility earlier this week and U.S. consumer sentiment
Stock market volatility earlier this week brought up a lot of possible recession conversations among market watchers, but in the daily U.S. consumer sentiment index, the volatility was non-existent. What is becoming apparent, however, when we look at the five indexes that make up the ICS, is consumers’ divergent outlook on “now” and “later.” Since April, the indexes that measure current measures for buying conditions and personal finances have been sliding down, while indexes for future expectations are rising. In the near term, this supports the slower spending environment that we expect to see in the second half of 2024.
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