The Economic Sentiment Indicator (ESI) is made up of five biannual surveys gathering the views of households and the four industrial sectors on the current and expected economic situation. The surveys have been conducted twice yearly in January and June since 2006. The latest survey was carried out in June 2022.
Having been relatively stable prior to the pandemic, the ESI fell dramatically in, going from 32 in the January 2020 survey to -16 in June 2020, which is the biggest drop from one survey to the next since 2006. The ESI is now approaching pre-pandemic levels, reaching 29 in the June 2022 survey.
The table below shows the results from each of the five surveys. A detailed overview of net figures for each question in the surveys is available in the Statbank.
Households are becoming more cautious
The confidence indicator for households is -5 in the latest survey, which is a 10-point drop from the January survey. This is the lowest indicator score since 2011. The survey thus suggests that the pandemic has not significantly impacted Faroese consumer confidence, but the rising consumer prices appear to affect households.
Households have a pessimistic outlook on their expected financial situation over the next 12 months compared to their view of today’s economy. Since 2006, the net confidence indicator has averaged at 0.5 and has been above the long-term average in the past decade. However, it fell to -15 in this latest survey. Only the June 2008 survey had a lower confidence indicator for households expected financial 12 months from now compared to today. Looking back on the past year, households report a drop in the net indicator.
Regarding the general economic situation and the general economic outlook for the coming year, households forecast a decline in the economy 12 months from now compared to today. The net confidence indicator is -25. At the height of the Covid-19 pandemic in the summer of 2000, the net confidence indicator was -12, i.e. households were then somewhat more optimistic than in the latest survey.
Not the right time for major purchases
Significantly fewer households say that now is the right time for major purchases such as furniture and electronic items than in the January 2022 survey. Fewer households also believe that the coming year compared to the previous year is the right time to buy a car or spend large amounts on home improvement. This affects the outlook for the trade and retail sector.
The survey questions and graphs are available on the consumer page.
Low confidence in trade and retail
The confidence indicator for the trade and retail sector is declining. The long-term trend shows a gradual decline for the trade and retail confidence indicator since 2016. In the past five surveys, the indicator has been slightly below the average for 2006-2022. As a major supplier of goods for the domestic market and household consumption, this industry sector is negatively affected by the growing cautiousness of households and the reduced willingness to buy. The trade industry does, however, have a slightly more optimistic outlook on the year ahead than in the previous surveys.
The survey questions and graphs are available on the retail trade page.
Service sector is more optimistic
The service sector, which includes restaurants, hotels and transport companies, was hit hard by the pandemic. Since the big drop in 2020, the confidence indicator has increased in every survey, and it continues to rise in the latest survey.
Businesses report particularly strong trade over the past year; however, many companies expect less employment over the next 12 months.
The survey questions and graphs are available on the services page.
Higher demand for goods from the primary sector and industry
Covid-19 restrictions hit international fish markets hard, which caused a relatively big drop in fish exports and growing stocks of finished products. But the primary sector now appears to be recovering.
Compared to the previous survey, the primary sector is now expecting more orders than usual, as well as from abroad. More production is also expected over the next year. Faroese exporters’ foreign market share appears to be improving, although the primary sector and industry is expecting fewer orders in the next 12 months.
Stockpiles have been below the long-term average levels in the past three surveys. In the latest survey, however, businesses reported a slight increase in the stock of finished products.
For further details, visit the theme page.
Less activity in the construction industry
In the survey for the construction industry, companies report fewer orders than normal. The net figure has been below the long-term average since summer 2019. From 2014 to 2018, the confidence indicator for the construction industry was relatively stable and high.
Many construction companies say they are currently experiencing no production limitations. A growing number of construction companies are expecting increased employment over the next year. Construction companies have, on average, reported that they have secured work for the next 12 months.
The survey questions and graphs are available on the construction page.