Big-Picture Snapshot

Drivers this month

The August reading of -21.10 marks the lowest point since November 2023’s -22.20. Key drivers include rising borrowing costs linked to aggressive monetary tightening, dampening consumer sentiment. Inflation remains sticky at 4.70% YoY, above the central bank’s 3% target, weighing on real incomes. Meanwhile, ongoing geopolitical tensions in the region stimulate uncertainty, reducing optimism. Shelter costs added 0.15 percentage points (pp) to negative sentiment, while wage stagnation subtracted 0.12 pp.

Policy pulse

The central bank has increased its policy rate twice this quarter, raising the benchmark rate from 6.50% to 7.25%. This move aims to curb inflation pressures but places downward pressure on consumer borrowing and spending. Despite the cooling sentiment, inflation readings are yet to align closely with the 3% target, indicating a lag in monetary policy effectiveness. The fiscal stance remains mildly expansionary, with government borrowing projected at 4% of GDP.

Market lens

In the first hour after the consumer confidence release, the BG currency depreciated by 0.40% against the US dollar, while 2-year government bond yields rose 10 basis points, signaling increased risk aversion. Breakeven inflation swap rates moderated slightly, reflecting tempered inflation expectations. The equity market posted 0.50% losses, led by retail and discretionary sectors reacting to muted consumer spending outlooks.

Foundational Indicators

Core macroeconomic context

The current Consumer Confidence level of -21.10 should be set against several core indicators: BG’s GDP growth slowed to 1.80% annualized in Q2 2025 from 3.20% in the same quarter last year. Unemployment rose modestly to 6.30%, the highest since 2022. Inflation remains above target, driven by food and energy prices. Real disposable income contracted by 0.80% over the past six months, curtailing household spending.

Fiscal policy & budget dynamics

The government continues to balance stimulus efforts with fiscal prudence. The 2025 budget deficit is forecast near 4% of GDP, slightly lower than the 4.50% in 2024. Tax revenues have improved thanks to wage growth, but increased spending on social programs aims to support vulnerable groups amid slowing growth. Medium-term fiscal sustainability remains a concern if consumer spending falters further.

External shocks & geopolitical risks

Heightened geopolitical risks in Eastern Europe and trade uncertainties weigh on sentiment. Energy prices surged 6% in the past quarter due to supply disruptions, feeding through to consumer costs. These external headwinds amplify the domestic challenges from inflation and tighter credit conditions.

Chart Dynamics

Historical trends

Consumer Confidence in BG peaked at -8.40 in August 2024 but has generally trended downward since, consistent with tightening financial conditions and external pressures. The August 2025 index at -21.10 is comparable to the lows seen in early 2023, illustrating significant cyclical weakness. Over a five-year horizon, confidence typically rebounds within 6-9 months of troughs, but current global uncertainties may prolong recovery.

Comparative analysis

Compared to neighboring economies, BG’s confidence dip is sharper but aligns with regional trends influenced by inflation and political risk. The YoY change from -16.40 in May 2025 to -21.10 in August represents a 28.70% decline—a steeper fall than in the past two cycles, underlining a potentially deeper consumer pullback.

Structural trends

Long run, BG’s consumer confidence demonstrates sensitivity to inflation volatility and fiscal policy consistency. Recent structural shifts toward a service-oriented economy and growing digital consumption alter traditional spending drivers. These changes complicate sentiment interpretation and suggest evolving behavioral patterns.

Forward Outlook

Bullish scenario (20%)

Inflation moderates faster than expected due to improved supply chains and energy stability. With central bank rate hikes slowing, consumer borrowing costs ease, reboosting spending. Fiscal policy adapts to support green investments, stimulating growth and lifting confidence towards -12 by mid-2026.

Base scenario (55%)

Inflation remains moderately above target, and rate hikes plateau. Economic growth stays sluggish around 2%, with consumer confidence recovering cautiously but not fully. Unemployment stabilizes near 6%, and fiscal stimulus offsets some risk, holding confidence near -18 to -20 in the next two quarters.

Bearish scenario (25%)

Inflation proves stubborn, prompting further tightening. Geopolitical shocks exacerbate energy costs and trade disruptions. Consumer confidence deteriorates further below -25, pulling consumption into contraction and risking a mild recession. Fiscal capacity limits stimulus, prolonging the downturn.

Closing Thoughts

Balanced risks

The latest Consumer Confidence data underscores the fragile state of BG’s economy. While core indicators point to headwinds, central bank and fiscal responses buffer some downside. The external environment remains the wildcard. Navigating this landscape will require patience and adaptability from policymakers and markets alike.

Data source and methodology

All figures derive from the Sigmanomics database, blending official statistics and proprietary surveys. Consumer Confidence is seasonally adjusted and benchmarked historically for accuracy. Comparative and forward-looking assessments incorporate cross-sector analysis and real-time financial data.

Internal references

For deeper context, see Consumer Confidence Cycles in BG, Monetary Policy and Consumer Sentiment, and Geopolitical Risk Impacts on BG Economy.

Consumer Confidence vs BG Retail Index since 2020

Since 2020, consumer confidence and the BG Retail Index (BGRX) have exhibited a strong positive correlation (r=0.82). Major drops in confidence in early 2023 preceded retail index declines of up to 15%. Recovery phases saw retail gains of 10-12%, lagging sentiment improvements by 1-2 months. This dynamic proves insightful for predicting retail sector moves from confidence shifts.

Mini chart: Consumer Confidence (blue), BG Retail Index (orange), indexed to 100 in Jan 2020.

FAQ

What is Consumer Confidence in BG?

Consumer Confidence in BG measures how optimistic or pessimistic consumers feel about the economy’s future.

How does the latest Consumer Confidence report affect the BG economy?

The August 2025 dip signals reduced household spending, which could slow GDP growth and impact financial markets.

What factors influence Consumer Confidence trends in BG?

Key factors include inflation, monetary policy, fiscal measures, geopolitical risks, and labor market conditions.