INTERNATIONAL. After months of speculation and uncertainty, it appears the penny has finally dropped for the world’s consumers. The latest Nielsen Consumer Confidence Index has fallen to its plunged to 88 - down six points in the last six months – in the largest single drop the Index has recorded in the last three years.

The Consumer Confidence Index, the definitive gauge of consumer sentiment in 48 countries is now at its lowest level in several years, according to the research firm.

Consumer confidence fell in 39 out of 48 countries in the past six months, with New Zealand, the US and Latvia suffering the deepest declines. Among the 39 markets recording a decline in consumer confidence, 15 fell by double-digits.

“The last six months have been the most turbulent period for the global economy in several decades. When the US sneezed at the outset of the sub-prime disaster nearly a year ago, the rest of the world quickly caught a cold. No region or country has been spared the domino effect of the US sub-prime and credit crisis”, observed David Parma, global head of Customized Research, The Nielsen Company.

“Consumers around the world are struggling with the same global issues that are impacting their daily lives. It’s an unfortunate pendulum. On the one hand we are seeing soaring global oil prices, rising commodity prices which are impacting grocery prices, rising interest rates and increasing inflation. This is happening in tandem with falling property prices, weakening labour markets, decreasing industrial output levels and growing unemployment rates which have all resulted in less spending power for the average person. Overall, it’s not a good picture,” commented Parma.

Across the regions, the US suffered the biggest fall in confidence, dropping a hefty 17 points, while in Europe, the Nielsen Consumer Confidence Index dropped six points to 83. The Index fell three points in Asia Pacific and EEMEA, and two points in Latin America.

Only Taiwan bucked the global trend of economic gloom, posting a buoyant 14 point increase in Nielsen’s Consumer Confidence Index in the past six months, up to 83 from 69 points, in the face of a landslide election win for Ma Ying-jeou in March on a platform heavily focused around economic growth.

Norway, India, Indonesia and Denmark topped global rankings as the most optimistic nations in Nielsen’s Consumer Confidence Index. Aside from consistently high consumer confidence, the two most optimistic nations in the world, Norway and India, share something in common: Their economies are benefiting from the by-products of economic slowdown. Norwegian consumers once again claimed top honours as the world’s most confident, with a score of 129, seven points ahead of booming India. Confidence in Norway did take a six-point dive in the six months to April, but this pessimism may not last long. For oil-rich Norway, rising fuel prices, the bane of many consumers across the globe, are a golden ticket: A recent estimate released by the Norwegian government reveals that for every NOK 10 increase in the price for oil, Norway will earn an extra NOK 6.1 billion. This means Norway stands to gain an extra NOK 100 billion approximately US$19.3 billion) from oil exports alone.

In India, home to the world’s second-most confident consumers, employment rates will rise in inverse proportion to the developed world, thanks to India’s enthusiastic adoption of workforce optimisation, the “outsourcing bug”. In recent years, India has established itself as a hub for outsourcing technical and support staff; as belts in the world’s leading economies tighten, we may well see India’s economy – and the confidence of its consumers – soar.

Other countries posting an increase in consumer confidence were the Netherlands (up 5%), Russia, Poland, Czech Republic (3%), Brazil (2%) and Belgium (1%). Consumer confidence remained unchanged in Germany and Indonesia.

Consumers in three of the world’s most developed economies, the United States, Japan and New Zealand, have taken a serious turn in the last few months. Not surprisingly, consumer confidence has fared badly In the United States, the world’s largest economy, epicentre of the sub-prime housing and credit crises. Consumer confidence in the US plummeted 17 points in the last six months, a drop second only in magnitude to New Zealand’s.

“With high gas prices, falling property values, food inflation and other economic pressures, it’s not a surprise that the economy is a top concern for many Americans,” said Parma. “Manufacturers and retailers take note, because clearly, value for money is more important than ever.”

The majority of United States consumers have a bleak view of the economy. Some 66% of US respondents have a pessimistic view of their local job prospects over next 12 months, with 50% saying they’re not so good, and 16% calling them downright bad. Only 3% ent of United States consumers consider their job prospects excellent.

No spare cash once all the basics covered

Meanwhile for nations where the ‘credit crunch’ has become an unwelcome household term in the last year, consumers’ wages and pay packets have been stretched to the maximum like never before. In the latest Nielsen survey, one in five (26%) Portuguese and one in four United States consumers said they have no spare cash after monthly essentials have been paid. One in five Belgians, Germans and French also said they have no spare cash along with 22% of UK consumers.

For those who are lucky enough to have a little left in the kitty, almost half are content to keep it there. 46% of global consumers claim they put their spare cash into savings, up 4% in the last six months. The world’s most avid savers have always hailed from Asia Pacific, where an average of 57% of consumers choose to build their nest eggs. The top ten saving countries are all from this region, with Singapore (69%), the Philippines (65%) and Thailand (65%) leading the charge.

Holidays and vacations continue to be a popular choice, with 34% of consumers across the globe planning to spend on a well-earned vacation. One in three (32%) consumers choose to buy new clothes, up 2% from six months ago. The luxury and fashion-obsessed Russians are the world’s biggest clothes shoppers; a massive 68% of Russian consumers choose to hang their money in their closet, with the Vietnamese lagging behind at 51%.

Topping global rankings for least expecting a global recession are Russians, South Koreans and Vietnamese. About 60% said they do not expect a global recession in the next year.

Interestingly, the Nordic nations of Denmark (50%), Norway (46%) and Finland (45%) – countries that have always topped the Nielsen Consumer Confidence Index for their optimism – are most expectant that the world will be plunged into a global recession in the coming year. In Singapore, while 18% of consumers believe they are currently in a recession now, 47% believe a global recession will hit in the next 12 months, indicating a high level of future concern for global issues hitting their shores.

It is interesting to note that South Korea topped regional rankings for believing their own market is currently in a recession, with a staggering 81% of South Koreans laying claim to economic gloom in their local market. The remaining 19% are overwhelmingly positive; of these South Koreans who do not perceive their market to be in the doldrums, 63% said they do not expect a global recession in the next year.

Middle East concerns about inflation

During times of economic slowdown, global consumers rank inflation as their biggest concern (61%) followed by unemployment (53%), with interest rate rises lagging behind at 25%. Consumers in Eastern Europe, the Middle East and North Africa (69%) are most concerned about inflation, followed by Asia Pacific. In these regions, where economies are growing on an unprecedented scale, concerns about inflation are understandable. Four in five Latvians, Russians and Lithuanians (84%) are most concerned about inflation. The inflation rate in Russia is on the up-and-up. Latest figures indicate Russia’s inflation rate is somewhere between 12% and 14% and the economy is ‘overheating’. Inflation in Lithuania shot to 11.7% in April, the highest rate since January 1977.

What would concern you most, in the event of a downturn in your local economy?

Political instability 23%
Falling property prices 14%
Civil conflicts 14%
Strikes 6%
Other 5%
None 2%

Base: All respondents
Source: The Nielsen Company

Work-life balance just as important as economic factors

In these times of economic doubt and recession, the discrepancy between working demands and quality of life is growing ever greater. Consumers in the developed world are striving harder to maintain their economic position in a rapidly opening marketplace and consumers in developing markets are poising themselves to cope with demand. A globalised marketplace and the rise of information technology have given rise to a landscape in which the boundaries between working and living have blurred to the extent that for some consumers, the two have become inseparable.

“Demanding work schedules and careers have dominated the lives of many consumers in the past two decades. For many, such demanding lifestyles are starting to take their toll and there’s a whole generation of consumers who are seeking to find and sustain a healthy work-life balance,” said Parma.

Globally, one in three (28%) consumers voted work-life balance as either their biggest or second biggest concern over the next 12 months. This figure is only seven percent behind the economy (35%), an especially low margin given the flagging consumer confidence levels.

Unsurprisingly, consumers in the burgeoning markets of China (42%), Vietnam (41%), Indonesia (38%) and the Philippines (38%) top the charts for concern about getting their professional and social lives in equilibrium. Nine of the top ten countries that registered a high level of concern for work-life balance are emerging markets, with the exception of Portugal, where consumers are increasingly trading off their deeply ingrained lifestyle habits to cope with a sagging economy.

Note: The Nielsen Global Online Consumer Survey, conducted by Nielsen Customised Research, was conducted in April 2008 among 28,153 internet users in 51 markets from Europe, Asia Pacific, the Americas and the Middle East (Egypt and UAE).

The largest half-yearly survey of its kind, the Nielsen Global Online Consumer Confidence and Opinion Survey provides insight into current confidence levels, spending habits and intentions and the major concerns of consumers across the globe. The Nielsen Consumer Confidence Index is developed based on consumer’s confidence in the job market, status of their personal finance and their readiness to spend.

See also www.nielsen.com

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