Chinese consumer confidence decreased five index points this quarter in China to 105, yet still 14 points above the global average of 91, according to the latest consumer confidence report from Nielsen, a leading global provider of information and insights into what consumers watch and buy. After an increase in consumer confidence during the previous two quarters (108 index points in Q4 2011 and 110 index points in Q1 2012), consumer confidence, especially in lower tier cities, declined with the slowdown of income expectation being the top reason, showing a seven points decreased to 66%.
“After a few consecutive quarters of increase inconsumer confidence, it is reasonable to see asomepullback,” said Yan Xuan, President of Nielsen Greater China. “In spite of the decline in the confidence reading,China’s consumer remains one of the most optimistic relative to their counterparts in other major economies.Confidence cannot increase indefinitelyespecially in light of the current global economy and the ongoing European financial crisis as well as their impact onChina’s export growth.Over time, the Chinese government’s efforts to transformChinainto a consumption led economy will pay off for the country.”
Consumer Confidence in Tier 1 Cities Saw a Bounce
Rural consumers in China remained the most optimistic region with a confidence index of 113, eight points above the national average of 105. Year-on-year, rural confidence increased 3 index points.
Confidence among tier 1 consumers showed the strongest gain of 6 points, and they were the second most optimistic, from 101 to 107 (and year-on-year gain of 6 index points). Confidence decreased by four points in tier 4 cites from a Q1 2012 level of 105 points to 101 index points. Year-on-year, tier 4 cities posted a one point increase. Quarterly confidence in tier 3 cities posted at the level of 99 while quarterly confidence in tier 2 posted at 95.
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.
Rural and Tier One Consumers Indicate Optimism about Future Employment and Income
Consumer in rural areas indicated the highest confidence level on employment (92%) prospects followed by consumers in Tier 1 cites. Fifty nine percent of consumers in Tier 1 cities said their job outlook was good/excellent for the next six months, a seven point increase from the previous quarter. In contrast, Tier 2 China consumers were the least optimistic and posted below national average confidence for employment expectations.
“Impacted by the global economic downturn, weak manufacturing and export sectors led to poor job prospects for consumers in lower tier cities especially in Tier 2,” said Yan Xuan. “Tier 1, service sector job growth boosted consumer confidence in their job expectations.”
Consumers in Tier 1 are most optimistic about their personal income with a seven point increase to 71 percent compared to 64 percent last quarter, followed by consumers in rural area (70%)
“Slower economy and job growth led to lower income expectation in lower tiers,” said Yan Xuan. “In Tier 1, income expectation rose likely due to better employment prospects combined with lower CPI.”
Consumers in Tier 1 were the most willing to spend (48%) compared to 40 percent a year ago, followed by consumers in Tier 3 and Tier 4 (37%).
According to Nielsen’s survey, CCI of 30-39 year-old consumers surpassed younger consumers for the first time Since 2011 Quarter 4, owing to their optimistic attitude toward the macro economy and good income. Willingness to spend in the next 12 months also increased as a result.
Digital appliance, home appliance and furniture were on top of consumers’ planning list for consumption, for both younger demographic and those 30-39 years. Forty four percent of Chinese consumers age younger than 30 are planning to buy digital appliances, while 35 percent aged 30-39 consumers put it on the shopping list.
According to Nielsen, total fast moving consumer goods (FMCG) sales for Q2 increased by 17 percent year-on-year, with food FMCG sales accelerating at a faster pace than non food sales.
“Segmentation and fulfilling emerging consumer demand are key growth drivers in Tier 1. Nielsen’s retail measurement data shows that the male grooming category successfully expanded into new consumer segments and drove category growth, this is a great example of how to tap into that consumer demand” said Dale Preston, Senior Vice President, Nielsen Grater China. “Interestingly we see categories like chocolate and confectionary both growing at above 23% year over year showing that despite the decline in confidence, consumers in China are still eager to purchase indulgent categories”.
Mr Preston said: “Lower city tiers also continue to be an important area of focus. Even though growth has slowed slightly in lower tiers and rural areas, they still represent significant current business and future potential. Continued investment is the key for long term success.”
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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