Economic Confidence Still at 2009 Levels

Dragged down by European crises and sluggish growth, global economic confidence is near where it was in 2009.


Shoppers crowd in a jewellery store to buy in Beijing, China. Despite the country's slowing growth, Chinese consumers are among the most optimistic in the world.

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The global economy has stabilized considerably since the height of the economic crisis, but people the world over aren't feeling it.

Polling firm Gallup reported Monday that its global Economic Confidence Index for 2012 came in at 18, on a scale of -100 to +100. That's up only eight points from 2009. The analysis covers 108 countries, combining residents' assessments of current economic conditions and whether they think things will improve soon. Europeans are feeling the most dismal, with an economic confidence rating of -35, one point below where it was in 2009. Meanwhile, Asia is the most positive region, with an index reading at 32, up from 27 in 2009.

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"I think a lot of this is expectations-based and particularly [reflects] disappointed expectations," says Dennis Jacobe, chief economist at Gallup, explaining why people's perceptions do not track broader economic realities. He points to the sharp downturn and lack of an equally sharp improvement in many countries. Europe, for example, has dealt with repeated fiscal crises since the global economic downturn. That could dampen Europeans' expectations of future improvements, says Jacobe.

Many of the figures reflect economic problems in particular countries. Greece, which has long been a focal point of the European economic crisis, has the lowest economic confidence reading of any country analyzed, at -87, nearly 40 points below where it was in 2009. Cyprus's index reading is at -49, a full 60 points below where it was in 2009. That country recently experienced a financial crisis that threatened the Cypriot banking system. Only five of 28 European countries have confidence index readings above zero: Germany, Austria, Denmark, Switzerland, and Sweden.

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Meanwhile, China's index reading comes in at 73, behind only Uzbekistan and Qatar. The Chinese economy has continued to post strong but slowing growth in recent years, most recently coming in at 7.7 percent for the first quarter of 2013. A growing middle class in China with growing purchasing power may be powering that country's confidence.

Of course, confidence is subjective, reflecting people's sense of their country's economic past, present, and future. In other words, if a country improves from a very poor state, it may have a higher reading than a very strong country going through a weak period.

That may explain why the enormous and recovering U.S. economy still inspires negative confidence readings. Gallup also measures U.S. economic confidence on a weekly basis, and the latest U.S. reading came in at -14 — remarkably low compared to the recent global measure, but up from a trough of -53 in 2011.

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Likewise, that explains some of the disparities between countries with vastly differing economic situations. Rwanda, a country that has rebuilt from 1994 genocide, posted a robust 8 percent growth last year, which likely contributes to the country's high economic confidence at 68. Meanwhile, Germany, one of the strongest economies in the Euro zone, has an index reading of 9.

All of these subjective ratings of different economies matter because confidence is one ingredient to increased economic activity. Confidence and growth have a chicken and egg relationship, feeding into each other. Right now, it's just a question of improving the momentum on both sides of the equation.

"Confidence is a necessary but not sufficient condition for consumer spending," says Jacobe. "You need to be confident, but you also have to have the follow-up with the strong economy."

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