ASUNCION, Paraguay – Paraguay's Consumer Confidence Index (ICC) dropped to 47.67 in June, falling both monthly and annually, thus re-entering the 'pessimistic' territory, according to a report released by the Central Bank of Paraguay (BCP). Notably, high food prices and rising fuel costs are cited as the main reasons for the weakening consumer sentiment.

This report, based on a monthly survey conducted by the BCP among 400 households in the Asunción and Central regions, clearly shows a decrease in Paraguayan consumers' confidence in the current economic situation. The June ICC fell by 5.79 points from 53.46 in May and was 5.15 points lower compared to 52.82 in June last year. As a result, the index has fallen below the 50-point threshold, remaining in pessimistic territory.

Gustavo Cohener, head of Economic Statistics at the BCP, explained that such fluctuations in the confidence index can be temporary, influenced by various factors, including seasonal ones. He added that past data also suggests April and June have historically been the lowest months for the indicator. However, he acknowledged that this decline could be due to the impact of inflation.

Cohener elaborated, "The indicator reflects a seasonal decline observed in previous years after a recovery in May." He continued, "Economic factors such as food inflation, which remained high until June, and rising fuel costs may have negatively impacted consumers' perceptions." He particularly emphasized that rising fuel costs tend to negatively affect consumer sentiment.

When asked about the impact of exchange rate fluctuations on the ICC, Cohener responded that it had little effect, reminding that the dollar exchange rate was stable during the first 20 days of June, when the survey was conducted. Therefore, the recent downward trend in the exchange rate is more likely to be reflected in the July figures.

Other key indicators released alongside the Consumer Confidence Index also showed a decline. The Economic Situation Index (ISE) recorded 33.80, a decrease of 5.99 points from May and 4.62 points from June last year. The Economic Expectations Index (IEE) also dropped to 61.54, down 5.59 points monthly and 5.67 points annually.

Regarding household saving intentions, only 19.25% of all respondents reported having the capacity to save, which is a 6.50 percentage point decrease from May. However, this is 3.25 percentage points higher than in June last year.

The intention to purchase durable goods showed a monthly and annual decrease across all product categories. This suggests that consumers are hesitant to buy high-value items.

The BCP announced that it is currently working with the National Institute of Statistics (INE) to replace the sample for the ICC survey with a new one comprising 1,500 households. This work, which began in 2018, is expected to yield initial information from the new sample around September. Cohener added that the results of the current survey, based on representativeness, are not expected to change significantly. In addition to Cohener, César Yunis, Senior Economist at BCP, and Julio Juan Noguera, Monetary, Financial, and Accounting Analyst, were also present at the announcement.

Overall, Paraguayan consumers are feeling economic insecurity due to inflationary pressures, particularly rising food and fuel prices, which is leading to reduced intentions for saving and purchasing durable goods. Economic authorities are expected to closely monitor the impact of this psychological contraction on the real economy.

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