‘Helle Effect’ creating positive consumers

Consumer confidence is at its highest since 2007 and economists point to the prime minister as a source of optimism

Recent numbers from the national statistics bureau Statistics Denmark indicate that the nation’s consumer confidence is at its highest since November 2007, which was before the Great Recession took hold. The consumer confidence index, which is based on a nationwide pool of five key questions dealing with the national economy and personal finances, stands at 5.9 for August, compared to zero for the same month last year.


The figures continue a three-month long trend in which confidence has risen among consumers and it is especially the national economy that is inspiring a rosy outlook. The index for measuring where consumers see the economy a year from now has risen 12.4 points to 17.6 since May. 


The retail industry is also finally showing signs of halting its downward spiral, with inflation adjusted sales for July up 0.1 percent compared to the same month last year. This marks the first month since March 2012 in which the yearly development doesn’t indicate a drop in sales. 


The Helle Thorning-Schmidt effect 
Economists are unsure what exactly is causing this positive mood, as not much has changed in the national economy during the summer months, but point to a phenomenon they refer to as 'the Helle Thorning effect'.


“It is possible that good news, such as the end to the recession in the Eurozone and announcements from people such as Prime Minister Helle Thorning-Schmidt that the crisis is ending, has had a decisive effect,” the head of economic research for Nordea bank, Helge Pedersen, wrote in a press release. “There is a lot of psychology involved in how we view the economy, and it is possible that the prime minister has managed to recreate optimism in the people.” 


Pedersen, however, urges that things need to keep on moving in the right direction, as the crisis is only slowly fading away. If private consumption picks up, the road to recovery will be a lot shorter. 


The reality of retail
While July saw a much needed improvement from last year, things still remain weak in the retail industry. In fact, July saw a drop in retail of 0.6 percent compared to June, and sales stand at just 93.6 percent of 2010 levels. 


But as it can often take a while for the positive mood to turn into retail reality, economists say there is no need to diminish the optimism that seems to be gripping the population.