15 March 2011
Hong Kong Consumer Confidence Experiences Slight Dip After Steady Increment for Eight Quarters
Consumer Confidence Ended 2010 at 99 Points
Concerns for Increasing Food Prices Rule the Future Outlook
Consumer Confidence Fell in 25 out of 52 Surveyed Countries
After a steady increment for eight consecutive quarters, consumer confidence experienced a drop of 4 points to 99 points in the fourth quarter of 2010, according to the latest edition of The Nielsen Company’s Global Consumer Confidence Index. Consumer confidence fell in 25 out of 52 countries in the latest quarter as hope for a global economic recovery evaporated at the end of last year. Concerns of price increases as a result of raw material costs rising increased significantly as the key concern among consumers surveyed.
Nielsen’s Global Consumer Confidence Index measures consumer confidence, major concerns and spending intentions among more than 29,000 Internet users in 52 countries. The latest round of the survey was conducted between 10th and 28th November, 2010.
According to the latest survey, Hong Kong’s consumer confidence drop was mainly driven by a drop in optimism for the upcoming job prospects from 62 percent in Q3 2010 to 55 percent in Q4.
“Although the unemployment rate in Hong Kong decreased to 3.8 percent, the minimum wage law to be in effect in May has raised the concern of the low-income group. Many are worried that the imposing of the law will trigger companies to reduce operation cost by laying off staff, thus reducing their confidence towards the job prospects for the days ahead,” said Oliver Rust, Managing Director, The Nielsen Company Hong Kong.
Although consumers’ optimism towards job prospects in Hong Kong has declined in the latest quarter, consumers are still confident about their state of personal finance (62%) and spending intent (44%) in the next 12 months amid the improving economic environment in Hong Kong.
Across the 52 countries surveyed, the consumer confidence index at the end of 2010 remained unchanged from the previous quarter at 90 and finished the year two index points below the start of the year. Latin America was the world’s most optimistic region at 100 points, followed by Asia Pacific at 97 points. North America ended 2010 at 83 index points and Europe was the world’s most pessimistic region at 78 index points.
What are Hong Kong consumers concerned most about?
While the Hong Kong economy is undergoing a steady pick up, the economy (40%) continues to be the top concern. Food prices around the world have increased significantly over the last year as a result of increasing raw materials such as oil, driving the concern about the food prices (26%) more than ever as the second biggest concern.
“Food prices in Hong Kong have gone up 4% percent on average from 2009, with fresh vegetables (+13%) and fruits (+10%) seeing the highest increases. According to Nielsen Homescan, with the fresh food categories being purchased on average of every 2.7 days, consumers are feeling the effects of the price increases,” Rust said.
Survey respondents across geographic regions shared similar concerns with the economy (30%) leading as the top concern, followed by increasing food prices (21%), job security (19%), health (19%) and work/life balance (18%).
Growing Appetite in Stocks / Mutual Funds Investment
While putting cash into savings (66%) is still top the preference on how Hong Kong consumers spend their spare cash after covering their essential living costs, consumers’ interest in investing in stocks and mutual funds (56%) continues to rise as the stock market remained upbeat at the end of 2010. After a continuous increase on discretionary items for a few consecutive quarters, Hong Kong consumers started to slow down their spending on items such as holidays and out-of-home entertainment.
“Inflations across the majority of categories have caused consumers to tighten their purchase strings especially on discretionary items. Yet, with the consumers becoming more technology-savvy – heavy users of Smartphones, tablets and etc, they are willing to put in their money for new technology products (30%) despite the slow down on discretionary spending,” added Rust.
Visitors from China accounted for 60 percent of the total visitors arriving in Hong Kong, reaching 23 million in 2010, a sharp increase of 26 percent from 2009. Their continuous spending in Hong Kong has brought the macro economy a continuous improvement. This has been especially felt in the retail sector with sales recording a 18 percent growth from 2009 – with strong growth in consumer durable goods (+50%) and jewellery / valuable gifts (+26%).
Although spending from mainland tourists contribute to a big portion of the retail sales in Hong Kong, local retail sales also showed a positive trend in the last quarter of 2010. According to Nielsen’s FMCG index, local spending on fast moving consumer goods (FMCG) is growing at 16 percent, indicating that Hong Kong consumers are increasing their spending on grocery and daily necessities, despite their increasing concern for the job prospects and increasing food prices.
“While the economy expected to continue its momentum in 2011, the effects of inflation and the oil prices will be a concern and will start to place pressure on the economy. Therefore it is important for marketers to better understand the changing behavior of their target customers amid this changing economic environment to cater their growing demands and needs,” Rust said.
About the Nielsen Global Consumer Confidence Survey
The Nielsen Global Consumer Confidence Survey was conducted between November 10 and November 28, 2010 and polled over 29,000 consumers in 52 countries throughout Asia Pacific, Europe, Latin America, the Middle East, Africa and North America 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%.