Costa Rica consumer confidence keeps falling

September 26, 2008

The dropping value of the colón versus the U.S. dollar, mixed with rising prices, has driven consumer confidence down in recent months, according to a quarterly study by GfK The Marketing Group, a German multinational research firm.

Costa Rica´s consumer confidence for July, August and September fell by 19 points to settle at 65 points out of 200.

According to the weekly financial paper El Financiero, consumer confidence as measured by the GfK has fallen steadily for close to a year, since reaching 109 points last November. Anything above 100 is considered a positive outlook.

Economic numbers have been steadily painting a bleaker picture for Tico consumers. In one week in July alone, the colón dropped by 6.5 percent against the dollar.

The Central Bank´s international reserves have dropped over 20 percent over the course of the summer – from $4.9 billion in April to under $3.9 billion in late September – as it tries to keep the colón within a designated range and buys up its own currency on the currency exchange markets.

According to the Central Bank´s Monthly Index of Economic Activity, the Costa Rican economy´s growth rate slipped to its lowest clip since 2002, growing just 2.5 percent year-over-year in July.

Inflation for the year ending in August reached 15.4 percent, the highest seen in a decade.

The Costa Rican Chamber of Commerce, which announced the study, is optimistic the outlook will improve.

In a statement released earlier this week, the chamber noted that 60 percent of employment in Costa Rica is concentrated in the sectors that are growing the most: services, construction, transportation and commerce.

Business tends to increase by about 17 percent at the end of the year, chamber president Oscar Cabada said. That rise is pushed in part by an increase in commerce around the holidays and the arrival of the tourism high season, he added.

The chamber tempered its prediction for this year, saying it expected an 11 percent increase in economic activity in the final quarter.

“The situation would be positive, considering that the commerce sector is the largest employer in the country, with a fifth of the work force,” the chamber statement said.

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