Optimism stuck: Perceived Economic Opportunity Index stays flat in June

Monday, 16 July 2012 00:00 - - {{hitsCtrl.values.hits}}

The upward movement of the Perceived Economic Opportunity Index (PEOI) observed in April and May having hit the bottom in March after the Valentine season price increases in February slowed down to an almost absolute halt in June.

The June performance is also still short of clearing the bar to move from the ‘relatively pessimistic’ to ‘relatively optimistic’ territory.

It is noteworthy that the PEOI is almost at the same level as it was exactly a year ago when the regular monthly measurement was launched.

“This indicates that today people are no more optimistic about their household’s economic future than they were a year ago; a rather disappointing finding given the expectations of rapid post-war development,” the compiler of the index Foundation for Economic Freedom in Sri Lanka said.

“The inability of the vast majority to ‘save some of what is earned’ seems to have had a substantial impact on the result over the twelve months. The finding that the majority expect the situation to either remain the same of get worse in the next six months is a definite concern,” the Foundation added.

The PEOI is calculated on a monthly basis using a random sample of 100 persons based on seven questions: one each on income, saving and cost of living; one each on law and order, media freedom and corruption; and one question on opportunities to advance in the respondents job, profession or entrepreneurial activity. The answers can only have three possibilities; the current situation with regard to each issue is worse than it was six months ago, the same or better than six months ago.

A score of three is that Sri Lankans are becoming relatively more optimistic about the emerging opportunities while one is they are becoming relatively more pessimistic. A score of two indicates no change. Therefore, the trend is a far more important indicator of changing perceptions than the absolute number.

The Perceived Economic Opportunity Index is developed and is measured by the Foundation for Economic Freedom in Sri Lanka in partnership with Friedrich Naumann Stiftung Fur Die Freiheit. Fieldwork is carried out by market research agency PepperCube Consultants.