India Top, Korea Bottom, Consumer Confidence Study

Hong Kong: Consumer confidence dives around the world, with the latest Nielsen Global Consumer Confidence Index hitting an all-time low of 84 since 2006 according to The Nielsen Company.

A twice-yearly study, the Nielsen Global Consumer Confidence study polled more than 26,000 consumers in 52 markets from 22 Sept to 6 Oct 2008 about their confidence levels and economic outlook since the last survey in May 2008.

Conducted in the midst of the global financial crisis, the latest survey reveals that global consumer confidence has taken a further beating, dropping from its peak of 99 in 2006 to 84 this time round. Of the 52 markets surveyed, 43 (or 82%) have recorded a decline in the Consumer Confidence Index from the first half of 2008. The consumer sentiment is gloomy globally, with 62 percent thinking local job prospects are not looking good and more than two thirds not considering the next 12 months a good time to spend.

It is the fast developing markets that are turmoil proof with their consumers appear to be more optimistic, as evidenced by the performance of the BRIC markets – India tops the world as the most optimistic, Brazil and China recorded an increase in their Index score and Russia ranked the 5th most optimistic – all gained pace on the global rankings. (Chart 1)

Indian investors have been safeguarded by the country's relatively nascent financial market, where fewer investment options have resulted in savings accounts becoming the principal investment option for many consumers. According to Nielsen’s 2008 Money Monitor, Indians are more comfortable putting their hard-earned money in fixed deposits and saving for a secure tomorrow, than they are spending for a comfortable today.

“In the growing economies of BRIC countries, many products and services continue to post strong double digit growth and consumer spending has not been affected to the same extent as Western economies,” said Christophe Cambournac, President, The Nielsen Company Asia/Pacific/India.  “Despite being impacted by the current global conditions, investors and consumers in these large developing countries are aware that their medium-to-long-term prospects remain strong.”

By region, Latin America appeared the most optimistic with a regional Consumer Confidence Index average of 96.8, followed by EMEA at 88.5 and Asia Pacific at 85.1.  Consumer confidence in Europe fell five Index points to 77. In the US where the credit crunch originated, consumer confidence dropped further, with its Index hitting a new low of 82, down from 100 in the same period last year. The majority of US consumers (86%) think their country is in an economic recession and over half of those think the recession will linger for the next 12 months. 

Major concerns and spending desires
Globally – and unsurprisingly, one third of consumers are most concerned about the Economy, with one fifth concerned about Increasing Food Prices, followed by Work/Life Balance (18%), Job Security (17%), Health (17%) and Increasing Utility Bills (17%) (Chart 2)

One in five US consumers also said they had no spare cash after paying basic living expenses, as well as 28 percent of Portuguese and 19 percent of Austrians and Dutch (Chart 3). 

While no-one could have predicted the extent of the recent global financial crisis, consumers already started changing their spending patterns and shopper behaviour a year ago. “At the end of 2007, the USA was already entrenched in the sub-prime crisis and consumers around the world were grappling with falling property prices in tandem in rising food and fuel prices and volatility in local stock markets.  These events had already forced consumers to make changes to their lifestyle and right now they are simply intensifying these changes and cut-backs as they shift gear into serious credit crunch mode,” said Cambournac.

For sure, spending will remain tight over the upcoming Christmas season for western nations. Globally, three in five (62%) consumers described their state of personal finances as not so good/bad –a clear indication that extravagant spending sprees aren’t being on the cards in the near future.

“Compared to previous downturns, 2008 is likely to have a serious impact on lifestyle and cultural factors in many parts of the world,” Cambournac continued.   Nielsen Consumer Panel research, for example, has revealed that French consumers will cut down on their consumption of meat and wine during 2008 - the mainstays of their cuisine – while 37 percent will now also cut back on at-home entertainment, an integral part of French lifestyle.  According to the Nielsen consumer confidence survey, one in four (25%) French consumers said they had “no spare cash after paying basic living expenses”, up from one in six (17%) in May 2008.

When asked about their spending intentions after covering essential living expenses, about a third of global consumers choose to go for holidays/vacations, buying new clothes and paying off debts/credit card bills respectively.

“Even during economic slowdowns there are opportunities for companies, and continuing to invest in the brands and products during a downturn has never been more important to drive and secure brand loyalty for better days ahead,” advised Cambournac. “Competition is surely much keener than ever. Companies that stay constantly engaged with their target customers and differentiate themselves with innovative offers will come out of this downturn as winners.  Consumers will remember the companies and products which best understand their changing needs and demands during a slowdown.”

The most pessimistic
According to the Nielsen Global Consumer Confidence survey, South Korea which recently saw its stock market close at its lowest in four years languished at the bottom of the global rankings with an index score of 36, a loss of 14 points since the first half of 2008. Its neighboring country Japan came in second last at 44. Taiwan, despite a short-lived spike in consumer sentiment in the first half of the year resulting from the change of the local political scene, recorded a significant 23-point decrease to 60, the biggest single drop of all in its Consumer Confidence Index.

REMARKS: More country or regional specific information for the respective regions are available upon request.