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4 Jul 2008
Jakarta
56 percent of global online consumers and 42 percent of online consumers in Asia Pacific think their country is currently in recession, and consumer confidence worldwide has fallen to its lowest level in several years, according to the Nielsen Global Consumer Confidence Index, which measures consumer confidence, major concerns and spending habits in 51 countries.
The latest Nielsen Consumer Confidence Index dropped to 88 - down six points in the last six months – the largest single drop the Index has recorded in the last three years.
“Consumer confidence fell in 39 out of 48 countries in the past six months, with New Zealand, USA and Latvia suffering the deepest declines,” said David Parma, global head of consumer research, The Nielsen Company. Among the 39 markets recording a decline in consumer confidence, 15 fell by double-digits.
“The last six months have been the most turbulent period for the global economy in several decades. When the USA sneezed at the outset of the sub prime disaster nearly a year ago – the rest of the world quickly caught a cold. No region and no country have been spared the domino effect of the US sub-prime and credit crisis.”
“Consumers around the world are struggling with the same global issues that are impacting their daily lives. It’s an unfortunate pendulum. On the one hand we are seeing soaring global oil prices, rising commodity prices which are impacting grocery prices, rising interest rates and increasing inflation. This is happening in tandem with falling property prices, weakening labor markets, decreasing industrial output levels and growing unemployment rates which have all resulted in less spending power for the average person. Overall, it’s not a good picture,” commented David Parma, Managing Director, Nielsen consumer research.
Across the regions, the US suffered the biggest fall in confidence, dropping 17 points, while in Europe, the Nielsen Consumer Confidence Index dropped six points to 83. Nielsen Consumer Confidence Indices dropped three points in Asia Pacific and EEMEA, and two points in Latin America.
Taiwanese consumers on a roll
Only Taiwan bucked the global trend of economic gloom, posting a buoyant 14 point increase in Nielsen’s Consumer Confidence Index in the past six months – up to 83 from 69 points. “Taiwan’s new-found optimism is driven by recent election results and a belief that the new government can inspire confidence and deliver a better future for the country,” said Mitch Barns, President, Nielsen Greater China.
Indonesia’s consumer confidence remained steady at 120 points, taking it to second place in Asia Pacific and third place globally. Indian consumers continue to be the most confident in the region, despite posting a dramatic 11-point fall. India is one of the few markets that stand to gain from the grim economic outlook – In recent years, India has established itself as a hub for outsourcing technical and support staff; as belts in the world’s leading economies tighten, we may well see India’s economy – and the confidence of its consumers – soar.
“It is interesting to note how the general population differs from the online population. In the twelve month period from 1st half 2007 to 1st half 2008 our regular 6 city omnibus showed a marked decline in our Consumer Confidence Index with a dramatic drop of 17% of consumers who expected the economy to improve in the next 6 months. In 1st half 2008, only 13% of the consumers surveyed expected the economic situation to improve over the next 6 months” said Catherine Eddy, Executive Director Nielsen Consumer Research Indonesia.
The pessimistic majority
In the last twelve months, consumer confidence in the world’s second largest economy has plunged 19 points and Japanese consumers are not expecting things to improve anytime soon. “Consumer confidence has been hard hit in Japan. Lingering concerns over the lost pensions fiasco, compounded by the sharpest price increases in food and other essentials for nearly two decades - sparked by the rise in the cost of oil - has put Japanese consumer confidence at an all-time low,” said Nonoy Niles, President, Nielsen Asia, Pacific and India.
The most remarkable drop in confidence came from New Zealand, which plunged a staggering 18 points in the last six months. Despite a reasonably buoyant economy and low levels of unemployment, consumer confidence has dropped to its lowest level in a decade mainly due to interest rates, which have skyrocketed to 8.25 percent - one of the highest in the developed world – and the country’s reliance on trade with other plummeting economies such as the United States and Japan. Inflation, too, is a factor: food prices in New Zealand have risen 1.8 percent since December 2007, and transport costs for the same period have risen 0.8 percent. 1According to Nielsen, 13% of Kiwis say they have no spare cash after they have covered living expenses, topping the Asia Pacific region.
Consumer confidence in Australia (-11), Hong Kong (-9), Vietnam (-9), Singapore (-9), and the Philippines (-9) also sank significantly. In Australia, continually rising interest rates and an impending budget announcement from a newly elected government left consumers unsteady in this usually bullish market. In other markets across Asia, particularly Vietnam, China and Singapore, runaway inflation continues to be a concern. 67 percent of consumers across Asia Pacific cited inflation as their biggest concern in the event of an economic downturn. In Singapore, trends in consumer purchasing behaviour, as revealed in Nielsen’s recent ShopperTrends study, are suggestive of a downturn in confidence. “In Singapore, we are seeing significant tell-tale trends of substantial growth in Private Label products, indicating that consumers are switching into belt-tightening mode,” commented Ms. Ooi Pin Pin, Associate Director, Retailer Services, Singapore.
Overall, Asia Pacific consumers are still amongst the most confident in the world. Five out of the global top 10 countries hail from Asia Pacific and the overall total for the region is one point above the global average. However, for many emerging countries in Asia and Oceania that have enjoyed the fruits of economic growth and boom in recent years, the last six months have been a stark wake-up call as consumers find themselves struggling with double-digit inflation, rising unemployment rates and stagflation for the first time in a decade. The staggering falls in consumer sentiment across the region have suggested that the party, as we know it, might be over.
“Consumers have many reasons to feel pessimistic right now and the stark reality is that there’s not much out there to feel optimistic about. It’s not surprising that three in five (56%) global consumers and 42 percent of consumers in Asia Pacific think their country is currently in a recession. “Even if their country is not officially in recession and has not recorded two quarters of negative growth – the snowball effect of the credit crunch and rising inflation has taken its toll and officially or otherwise – they certainly feel like they’re in recession,” said David Parma, Managing Director, Nielsen Cutsomized Research.
No spare cash once all the basics covered
While ‘credit crunch’ became an unwelcome household term in the last year, consumers’ wages and pay packets have been stretched to the maximum like never before. In the latest Nielsen survey, 13 percent of New Zealanders and 11 percent of Australians and Koreans said they have “no spare cash” after monthly essentials have been paid. Asian and Oceania consumers still consider themselves more flush than Europeans and Americans, however – one in four (26%) Portuguese and United States (24%) consumers claim to have no spare cash after covering essentials.
When consumers in Asia Pacific do have a little left over, 67 percent of them choose to put it into savings. This figure is up five percent in the six months from November. Two percent fewer consumers (39% down from 41%) choose to invest in stocks or shares – indicating flagging sentiment in the economy.
In recession now, or heading that way
Two in five (42%) of consumers in Asia Pacific believe they are currently in the midst of a recession. Of the remaining three-fifths of consumers surveyed, one in three (28%) percent believe the situation will escalate into a full-blown global recession in the next year.
Topping regional rankings for least expecting a global recession are the South Koreans and Vietnamese. It is interesting to note that South Korea topped regional rankings for believing their own market is currently in a recession, with a staggering 81 percent of South Koreans laying claim to economic gloom in their local market. The remaining 18 percent are overwhelmingly positive – of these South Koreans who do not perceive their market to be in the doldrums, 63 percent said they do not expect a global recession in the next year.
In contrast, almost half of Singaporeans (47%) and two in five Malaysians (39%) and Indians (38%) are most expectant that the world will be plunged into a global recession in the coming year. In Singapore, however, only 18 percent of consumers believe they are currently in a recession, suggesting a high level of concern for global issues.
During times of economic slowdown, consumers in Asia Pacific rank inflation as their biggest concern (67%) followed by unemployment (53%), with political instability lagging behind at 31 percent. In a region where economies are growing on an unprecedented scale, concerns about inflation are understandable. The Taiwanese, given their soaring confidence, are most concerned about inflation, with 80 percent of these newly empowered consumers citing inflation as their biggest concern in the event of a global recession. 77 percent of Chinese consumers cited inflation as their biggest economic concern – at the time the study was conducted, the inflation rate in China had soared to its highest level in over a decade, with food prices rising a staggering 23.3 percent. Since the survey was taken, the Chinese government has released the latest inflation figures, confirming consumers’ fears were well-founded – In the twelve months to April 2008, inflation rose 8.5% to reach a 12-year high.
74 percent of Singaporeans and 70 percent of Filipinos cite unemployment as their major concern should the economy take a dive. Recently, Singapore’s unemployment rate has crept to two percent, a relatively low figure in regional terms, but an issue of concern in this predominantly manufacturing and service-driven economy, where inflation hit a 25-year high in January of this year.
Work/life balance just as important as economic factors
In these times of economic doubt and recession, the discrepancy between working and living has come to the fore. 19 percent of consumers in Asia Pacific voted work/life balance their biggest concern for the next six months, almost on par with the level of concern for the economy (20%). Job security (11%) comes in at third place, with health (10%) the fourth biggest concern regionally.
About The Nielsen Global Online Consumer Survey
The Nielsen Global Online Consumer Survey, conducted by Nielsen consumer research, was conducted in April 2008 among 28,153 internet users in 51 markets from Europe, Asia Pacific, North America and the Middle East. The largest half-yearly survey of its kind, the Nielsen Global Online Consumer Confidence and Opinion Survey provides insight into current confidence levels, spending habits/intentions and the major concerns of consumers across the globe. The Nielsen Consumer Confidence Index is developed based on consumer’s confidence in the job market, status of their personal finance and their readiness to spend.
For the full report, please click here.
About The Nielsen Company
The Nielsen Company is a global information and media company with leading market positions in marketing information (ACNielsen), media information (Nielsen Media Research), online intelligence (NetRatings and BuzzMetrics), mobile measurement, trade shows and business publications (Billboard, The Hollywood Reporter, Adweek). The privately held company is active in more than 100 countries, with headquarters in Haarlem, the Netherlands, and New York, USA. For more information, please visit, www.nielsen.com.
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