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News    >    09 Mar 2012

Nielsen : Chinese Consumer Confidence Up

09 Mar 2012
Beijing

  • Rural Consumers Most Confident
  • Largest Year-on-Year Confidence Gain in Tier 4 Cities
  • Discretionary spending rebounds as inflation eases and optimism for income increases in 2012     

9th March, Beijing: Optimism for a stronger expectations on income drove consumer confidence in China up four index points last quarter in China to 108 pts, 19 points above the global average of 89 according to the latest global consumer confidence findings from Nielsen, a leading global provider of information and insights into what consumers watch and buy.

After Chinese confidence levels fell to 104 and 105 index points in Quarter 2 and Quarter 3, Chinese consumer confidence returned to Quarter 1 levels. In Nielsen’s latest consumer confidence survey, China and the U.S. posted two of the strongest gains of 108 and 83 points respectively, while 60 percent of global markets measured posted confidence declines.( Chart 1)

The Nielsen Global Survey of Consumer Confidence and Spending Intentions, polled more than 28,,000 consumers in 56 countries throughout Asia Pacific, Europe, Latin America, the Middle East, Africa and North America. Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism. Nielsen’s China Consumer Confidence Report is the largest of its kind, reaching more than 3,500 Chinese consumers from tier one cities to rural areas on a quarterly basis.

Year-on-year, Chinese consumer confidence gained eight index points (up from 100 pts in Q4 2010) and China ranked the   sixth most optimistic country last quarter. India was the world’s most optimistic country at 122 points and Asia was the most confident region globally featuring seven of the most optimistic markets. China was the fifth most optimistic country for job prospects in the latest quarter and ranked the seventh most optimistic country for personal finances outlook.

“A brighter employment and income outlook for this year and increasing willingness to spend combined with inflation easing were the main drivers of China’s consumer confidence rebound.” said Karthik Rao Nielsen Greater China Managing Director.   “As inflation stabilized and dropped to its lowest level in December 2011, consumers had more disposable income in their wallets and reignited their discretionary spending across most sectors,’ said Mr. Karthik Rao.  

Year-on-year, Chinese consumers spent more on out of home entertainment (+8), new technology purchases (+5), clothes (+5), dining out (+4) and vacations (+4) according to Nielsen.

At the end of last year, Chinese consumers topped global rankings for discretionary spend on out-of-home entertainment, technology spend and investing in the stock market and were the second biggest discretionary spenders on new clothes (after Russian consumers).

“In 2012, China’s GDP growth will slow down but Chinese economy will continue the transition from export and resource driven to consumption and innovation driven.” Said Yan Xuan, Nielsen Greater China President.  “Lower GDP target also shows China’s determination to strive to improve it’s economic growth quality.”

“The good news is that Chinese consumers expect inflation to continue to stabilize in 2012. Thirty percent of Chinese consumers expect overall prices to remain the same or decrease in 2012 compared to 17 percent a year ago and 53 percent expect real estate prices to remain steady or decrease in 2012.   The volatility of inflation has subsided consumers concerns and they are embracing a more stable and steady 2012.”  Said Mr. Yan Xuan.

Rural Consumers Most Confident. Largest Year-on-year Confidence Gain in Tier 4 Cities

Rural consumers in China remained the most optimistic region with a four index point confidence gain 110 to 114, its highest level in the last three quarters and six points above the national average of 108.  Year-on-year, rural confidence increased 7 index points. (Chart 2)

Tier four consumers were the second most optimistic with a 5 point quarterly gain from 100 to 105 (and year-on-year gain of 10 index points) while confidence rebounded by six points in tier 2 cites from a Q 3 2011 level of 96 points up to 102 index points. Year-on-year, tier 2 cities posted a four point increase.  Quarterly confidence in tier 3 cities edged up one index point to 102 (with a year-on-year gain of 7 index points) while quarterly confidence in tier 1 remained flat at 101, with a year-on-year gain of 6 index points.

Across regions in China,  the Coastal region posted an index score of 113,while the Central areas posted an index score of 112. With a seven point increase in the latest quarter, consumer confidence in west part of China reached 98, narrowing the gap with other regions.

“Last year many of the targets set in the 12th Five  - Year Plan to improve people’s life released, such as extending pension coverage. The decrease of the food price and housing are also key reasons behind Chinese consumers’ high confidence.”  Said Yan Xuan, Nielsen Greater China President.

Rural and Central China Optimistic About Future Employment and Income

Consumer in rural areas enjoyed the highest confidence on employment (89%) and income (73%) prospects followed by consumers in lower tier cities. Consumers in tier one were the most willing to spend (44%) compared to 33 percent a year ago, followed by consumers in tier two (43%).  

Regionally, consumers in central China are most optimistic about employment while coastal regions were most optimistic about income and immediate spending intentions.

Eighty percent of central China consumers said their job outlook was good/excellent for the next six months, nine points above the national average of 71 percent.  In contrast, north east China consumers remained the least optimistic and posted below national average confidence for employment and income expectations while consumers in the west are least willing to spend for the next six months.

Main Concerns

Income, health and increasing food prices to be the top concerns for Chinese consumers nationwide.  Differences in concerns prevailed across tier cities and rural areas.  Income (72%) was the main concern for rural consumers, followed by health (32%) while in tiers 1 to 4 cities, consumers maintained similar concern levels for income and health.   

“Rural Chinese consumers and their counterparts in lower tier cities enjoyed high confidence through out the year, however their willingness to spend were still low comparing consumers in key cities,” Karthik Rao, Nielsen Greater China Managing Director, “With the speed of the urbanization and the determination to improve the quality of people’s life by government, we believe that consumers in rural and lower tier cities will have more and more opportunities to access to a wider variety of goods and services.  They will become the engine of consumption power.”

Consumption Outlook

According to Nielsen, total fast moving consumer goods (FMCG) sales for 2010 increased by 17 percent year-on-year, with non food FMCG sales accelerating at a faster pace than food sales. Other foods (mainly edible oil +24%), Personal Care (+23%) and Impulse Foods (19%) showed growth in 2011. FMCG sales increased 19 percent year on year in the latest quarter. (Chart 3)

“2011 has been a challenging year for most business, however we saw four key trends shaping China’s consumption industry in 2011—rising  power of consumers in lower tier cities and rural areas,  premiumization , innovation and the growing non traditional retail channel, for example ECommerce ” said Rao. “According Nielsen, Non-food FMCG sales grew nine percent overall, driven by a 23 percent increase in personal care category which benefited the most from premiumization and innovation. Consistent with strong confidence in rural areas, FMCG sales showed a strong growth momentum in 2011 in the rural areas as well. We believe these trends will still continue to be the growth engine for the business wanting to stand out from the crowd.” ( Chart 4)

“With government’s determination to boost domestic consumption in China, business will benefit from the enormous consumption power in China. “One example is the recent news on Chinese government's plan to lower import tax on consumer and luxury goods to encourage domestic consumption. However, in this increasingly competitive market, businesses will need to clearly understand how to reach their consumers with offers relevant to their ever changing needs in order to win in China.” said Rao.

About Nielsen

Nielsen Holdings N.V. (NYSE: NLSN) is a global information and measurement company with leading market positions in marketing and consumer information, television and other media measurement,

online intelligence, mobile measurement, trade shows and related properties. Nielsen has a presence in approximately 100 countries, with headquarters in New York, USA and Diemen, the Netherlands. For more information, visit www.nielsen.com.

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Reference

Chart 1:

Chart 2: Chinese Consumer Confidence

Chart 3: Nielsen : FMCGG Value Growth Rate

Chart 4: Nielsen: FMCG Sales Value Growth Rate By City Tiers

 


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