Japan: Nuclear crisis prompts consumer sentiment plunge in April
May 16, 2011
Consumer confidence plummeted in April, recording the largest drop since the Asian financial crisis, as the aftermath of the earthquake, particularly the situation at the Fukushima nuclear plant, failed to improve as expected. In April, consumer confidence fell 5.5 points over the previous month, which even surpassed the 2.6 point drop registered in March and the 1.9 decline expected by the market. That said, at the current level (April: 33.1 points), the consumer confidence index remains above the record low reading of 27.4 points registered at the trough of the crisis in December 2008. A reading below 50 points indicates that pessimists outnumber optimists. The sharp drop in household confidence was broad-based, as all the main categories recorded losses. In particular the employment component declined 9.4 points to 27.6 points while the willingness to buy durable goods component retreated from 38.8 points to 32.9 points. These weaker readings add greater weight to the notion that private consumption will experience a large contraction in the coming quarters. Nevertheless, analysts expect consumer spending to slightly improve following the end of the national mourning period. In addition, the employment was hit less than expected and should thus remain supportive of private consumption.