Russian Consumers are not Ready to Start Thinking Beyond the Recession
The world is emerging from the economic crisis, and with it, global consumer confidence is rebounding, according to the latest edition of the Nielsen Global Consumer Confidence Index, which jumped from 77 index points in April to 86 points this month. Brazil and key Asian markets are posting double-digit increases in consumer sentiment, while the U.S. recorded its first increase in consumer confidence since 2007. Despite this renewed sense of optimism, actual behaviour remains restrained; many consumers – and in Russia as well, - remain skittish about spending their money. In some countries, spending habits appear to have changed permanently.
Nielsen’s Global Consumer Confidence Index tracks consumer confidence, major concerns and spending habits among more than 30,500 Internet users in 54 countries. In the latest round of the survey conducted between 28 September and 16 October 2009, Hong Kong posted the largest consumer confidence increase in the third quarter compared to Q2, up 14 points from 79 to 93 index points, followed by South Korea (+13 points) and Brazil (+12 points).
India, Indonesia and Norway continued to top the global rankings for the most confident nations, while the most pessimistic nations were Latvia and Japan. Consumer confidence rose in 45 out of the 52 countries compared to six months ago. (Ukraine and Saudi Arabia were added in the latest round of the survey.) In April, the Nielsen Consumer Confidence Index hit its lowest point of 77 index points, but as massive stimulus plans began to take effect around the world during the second quarter, consumer confidence slowly began to recover.
“A nine-point surge in consumer confidence signifies a welcome return to positive territory. It really demonstrates that in the last six months, a majority of consumer sentiment across the globe has shifted gears from recession to recovery -- the tide has turned,” said James Russo, Vice President, Global Consumer Insights at The Nielsen Company. “In this economic climate, sentiment is closely correlated to actual sales. For example, in Australia, consumer confidence was up 11 points in the third quarter, and strong economic conditions prompted the Reserve Bank of Australia to raise rates, becoming the first G20 country to do so. Correspondingly, we have seen sales increase 2 percent in each of the last two months in defined fast moving consumer goods (FMCG) categories while online sentiment (buzz) regarding the recession is at the lowest levels since we began tracking that dynamic in January 2009.”
Consumer confidence fell in only two countries in the third quarter: Spain (-4) and Japan (-2).
Among other BRIC nations, consumer confidence rose 8 points in India, 6 points in China and 4 points in Russia compared to the previous quarter.
In should be noted that while Consumer Confidence Index in Russia showed 4-piont growth compared to 2nd quarter 2009, its fluctuations - which have been revealed within the interim measurements within the framework of Nielsen’ ‘Russians through Crisis’ project – demonstrate instability of consumer sentiment towards recovery of national economy. While in May-September 2009 Consumer Confidence Index grew up to 88 points, in October 2009 it lost three points compared to September 2009. The key factor that influenced this result is considerable decrease of consumers’ expectations about job prospects on the market.
Australia and New Zealand also posted double-digit increases during the last quarter, while Europe’s two largest economies, France and Germany, posted the highest increases in the Eurozone, up 7 and 5 points, respectively.
Nielsen’s global consumer confidence in October rebounded to almost the same level as the first half of 2008 before the very worst of the financial crisis hit global markets. “The survey shows how much the pace of economic recovery has accelerated in the last six months, especially in Brazil and some Asian markets,” said Russo. “Nielsen consumer, retail and media data also shows a trend of consumers shifting gears from recessionary into recovery mode.”
Growing Indicators of Confidence in Asia and Latin America
One key indicator of business confidence, Asia Pacific ad spending, rebounded much faster than expected by many analysts, with a year-on-year increase of nine percent and an estimated US$111.94 billion spent in the region during the second quarter. Across many markets in Latin America, Asia Pacific and Europe, sales of FMCG are increasing as consumers start buying discretionary items after a prolonged period of sticking to a tight budget and the essentials,” said Russo. “These are all good indicators that the global recession is coming to an end.”
This month, 66 percent of global consumers said their economy is in recession compared to 71 in April 2009, but for many consumers in Asia Pacific and Latin America, the recession is becoming past tense. Amongst Chinese, 87 percent said their nation is out of recession, while over 60 percent of citizens in Hong Kong, Norway and Australia said the same. Meanwhile, half of Brazilians, Indians and Chileans also believed that the recession has ended. Among consumers who say they are still in recession, one in five (26%) expect that their country will be out of recession within 12 months.
In Hong Kong, the number of consumers who said they were in recession dropped by nearly 30 percent in the last three months. In the latest survey, 32 percent of Hong Kong consumers said they were in recession compared to 60 percent in June 2009. “After several quarters of holding back we are starting to see consumers open their wallets again as we’re seeing a recovery in many sectors from high ticket retailing, property and finance, however this has yet to translate into FMCG packaged goods as sales have remained relatively stable throughout the year,” said Oliver Rust, Managing Director for The Nielsen Company in Hong Kong.
“With the Hang Seng index rebounding to its pre-financial crisis levels in October and sales of properties seeing a significant increase, consumers are increasing their spend on discretionary items such as new clothes, out of home entertainment, technology and holidays which they cut back a year ago,” continued Rust.
China's six point increase in the last quarter was driven by strong improvements in local job prospects and personal income across the country. Nearly six in ten Chinese consumers described local job prospects as good or excellent in the next 12 months, a 14 percent increase compared to the second quarter. Consumer confidence in China's tier two cities posted the highest rebound in the third quarter, up 22 percent compared from the previous quarter.
“In the previous survey conducted in July, we saw that consumers were beginning to feel that the economy had bottomed out and was on the road to recovery. In the third quarter we see an extension of this optimism. Consumers are gradually feeling more comfortable with their situation and feel that the economy is moving in the right direction,” said Mitch Barns, Greater China President at Nielsen. ““Consumers in China are still hesitant to go out and spend money, yet the results indicate that there is a willingness to spend on new products. Companies that focus on innovation and introducing new products to the market will be the ones to drive consumption throughout China.”
South Korea’s Kospi index is up nearly 50 percent since the start of the year and a weak Won has provided an attractive boost for its manufacturing and export industries, especially for its key export sectors of consumer electronics and cars. Brazilians’ confidence was the highest in South America, and strong economic growth, combined with the winning bid of Rio de Janeiro to host the 2016 Olympic Games, have clearly buoyed the nation’s outlook.
“As the last country to enter the global recession and among the first to recover, Brazil has essentially returned to pre-crisis levels of industrial product. Employment is rising, and along with that, consumer consumption. Brazilians are feeling very optimistic about their future: the 2016 Olympic Games, combined with the 2014 World Cup as well as new energy projects guarantee a high level of infrastructure investment for the next few years, and Brazilians are rightly feeling confident about the economic future,” said Russo.
Cautiousness in Europe, North America
For the rest of the world however, sentiment towards economic recovery remains moderate, and with it, consumer spending. “The majority of consumers in the U.S. and Europe have conceded to a measured economic recovery, but it is recovery nonetheless,” said Russo. “While consumer confidence in the U.S. edged up 4 index points in Q3 – the first increase since early 2007 -- that hasn’t translated into spending confidence for the vast majority of American consumers. Clearly, this recovery will be manifested in measured and restrained spending as consumers work to repair their balance sheets.”
Among those consumers who believe they’re currently in recession, over 60 percent of French, German and Irish believe that economic recovery is more than a year away. Of all regions, Europe – especially Eastern Europe -- expects a longer road to recovery than all other global regions including North America, according to the survey. Consumer confidence in Eastern European countries recorded an average of 10 index points lower than Western European nations. Spain, which posted the only consumer confidence decline in Western Europe in the third quarter, is expected to be the only Eurozone nation to contract in 2010, according to latest IMF projections.
Thinking beyond Recession
While global consumers continue to voice concern about job security and the economy, many have started to focus on other issues. Worry about job security has decreased over the past six months. In April, 20 percent of global consumers named job security as their main concern in life, closely followed by the economy (19%). Today, 18 percent of global consumers say the economy is their prime concern, followed by job security (16%).
Issues such as work/life balance and health both increased by three percentage points in October compared with six months ago, another indication that consumers’ obsession with everything economy and recession-related is beginning to subside.
About the Nielsen Global Consumer Confidence Survey
The Nielsen Global Consumer Confidence Survey was conducted between 28 September – 16 October and polled over 30,500 consumers in Europe, Asia Pacific, North America and the Middle East about their confidence levels and economic outlook. The Nielsen Consumer Confidence Index is developed based on consumers’ confidence in the job market, status of their personal finances and readiness to spend. The sample has quotas based on age and sex for each country based on their Internet users, and is weighted to be representative of Internet consumers and has a maximum margin of error of ±0.6%.
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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