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22 Apr 2009
Beijing
No one doubts the long term potential of China, but how has the deepening global financial crisis affected its consumers? Has the downturn of exports from China, the impact on local manufacturing and other recent events taken its toll, or is the confidence of Chinese consumers holding up in one of the world’s largest and most optimistic nations?
Nielsen has been looking at the changes in consumers’ confidence in 50 markets around the world since 2005 and especially in China, analyzing the impact this is having on consumer spending and looking for positive signs of recovery amidst the uncertainty that has taken over the world.
The latest Nielsen Online Consumer Confidence Survey, conducted 19 March – 2 April 2009 has found that Chinese consumers’ confidence has remained fairly stable for the last few years and although it dropped seven percentage points to 89 from 96 in April 2009, China’s consumers are still more confident than consumers in the majority of the world. In comparison to other emerging markets, China holds up against the other BRIC economies (Russia, India and Brazil) that have all seen much larger (double digit) drops in consumer confidence.
Global consumer confidence has plummeted to a record new low in the past six months, falling seven Index points, down from 84 to 77 according to the latest twice-yearly Nielsen Consumer Confidence Index, Consumer confidence plummeted by 29 Index points in Russia (down to 75 points from 104), marking the biggest fall in consumer confidence tracked by Nielsen globally. Regionally, Latin America suffered the biggest consumer confidence hit, falling 15 Index points (down to 82 points from 97) while consumer confidence in Europe and Asia Pacific both fell by seven Index points.
Indonesia topped Nielsen’s Global Consumer Confidence Index at 104 points, followed by Denmark (102 points) and India (99 points). The world’s most pessimistic markets are Korea (31 points), followed by Portugal and Latvia at 48 Index points. Confidence fell in 49 out of 50 markets – Taiwan was the only market to buck the global trend, edging up three Index points from 60 to 63, although still 14 points below the global average.
Global consumers have been battered and bruised by a constant onslaught of bad news in the last six months. Overall, consumers experienced a grim end to 2008 and braced themselves for a tough first half of 2009, which is what they are getting. The one exception globally is China where 65 percent thought their economy not currently in a recession. “The Central Government’s stimulus package of US$585 billion equates to 13.3% of GDP and is an enormous shot in the arm for Chinese consumer confidence. While the economy has undoubtedly slowed, the data from China’s NBS still show that February retail sales are still 15 percent up on last year and many Chinese Consumers now believe the next 12 months could be a good time to go back to investing in stocks and property. Chinese consumers are also maintaining their love affair with travel during the slowdown and top the list of markets surveyed by Nielsen when it comes to their intention to spend spare cash on travel,” said Mitch Barns, President, The Nielsen Company, Greater China.
The Nielsen survey found consumers in most markets less than hopeful of a light at the end of the tunnel in the year ahead. Among global online consumers who believe they’re currently in recession, 52 percent said they were bracing themselves for a global recession to last 12 months or longer. “One in two consumers aren’t expecting any miracles for a quick rebound – steady but stable is probably the best approach they are hoping for,” said Mr. Barns
Not everyone is prepared to suffer a prolonged recession, however; some consumers are already planning their post-recession party. Among current recessionistas, globally nearly one in four (23%) believes their country will be out of recession within the next 12 months, spearheaded by the Vietnamese (60%) and Indians (56%). Two in five Danish and Dutch consumers also believe they’ll be out of recession within a year, along with one in three Austrians, Swedes, Norwegians, Russians, Indonesians, Israelis, Mexican and UAE consumers.
While global consumer confidence plummeted to a new low, fears of unemployment and job uncertainly reached new heights. Job security was cited as the leading concern among internet consumers in 31 of 50 markets surveyed. Concern for job security rose to 22 percent in the latest survey, up from nine percent previously. “For the first time in this survey, job security has become a top concern in life in China,” said Mr. Barns
Six months ago, global consumers cited the economy and work / life balance as their two top concerns in life - but consumers’ priorities have rapidly changed along with the economic deterioration. Not only China (29%), Hong Kong (33%), India (29%), Singapore (32%), Vietnam (36%), Italy (24%), Spain (34%), Hungary (31%) and Mexico (29%) cited job security as their top concern in life today. “These numbers reflect the level of increasing concern for a depressed job market in every region,” said Mr. Barns.
Uncertainty in the labour force also remains a worry for the near future. One in five (26%) global consumers described their job prospects in the next 12 months as “bad” compared with 17 percent in October 2008. 76 percent of Chinese said job prospects were bad or not so good for the next 12 months, up 21 percent from October 2008.
The massive blow to consumer confidence is coming from the big concerns over job prospects?However there is also a relative fall in confidence over personal finance with more than half of Chinese consumers claiming that personal finance prospects would be bad or not so good for the next 12 months, up 15 percent from the last survey.
The good news for retailers, manufacturers, and service providers attempting to stimulate sales during the crisis, is that with the high level of promotional activity being seen across many types of consumer goods/cars/holidays, nearly half of Chinese online consumers are of the opinion that the next 12 months will be good time to buy things they need.
When consumers were asked how they are saving on household expenditure, high on the list of cutting back is out-of-home entertainment, delaying the replacement of major household items and looking for better deals on home loans, insurance and credit cards. Travel seems likely to be cut with a 14 percent fall from the last Nielsen survey. One in five Chinese consumers said they had switched to cheaper grocery brands compared to one in four in November 2008.
Chinese Consumers are changing their behavior during the economic downturn. Chinese consumers have been shifting their focus from investing back to saving and paying off debt, with nearly six out of 10 consumers claiming that they would put spare cash into savings after covering essential living expenses.
Chinese consumers still have a relatively strong desire for holidays, with nearly half of them claiming that they would spend spare cash on holidays after covering essential living expenses. This is a five percent decrease but still top of the list. Out of home entertainment becomes less important during the economic slow down for Chinese consumers with only three out of 10 consumers spending spare cash here.
“Chinese consumers are relatively conservative when compared with consumers in the western world; it is understandable that they have become more careful with their money even they have spare cash once they’ve covered essential items, as nearly all say they do.” Mr. Barns commented “Wen Jiabao suggests that confidence is more valuable than gold right now and there is no doubt that there is a direct link between consumer confidence and consumer spending. The greatest hope for return to stronger growth rates in China is the steady emergence of a consumer - led economy to provide balance to the export-led drivers of economic growth of recent years.”
About The Nielsen Company
The Nielsen Company is a global information and media company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence, 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 New York, USA. For more information, please visit, www.nielsen.com
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