Hong Kong – Consumer confidence in Hong Kong rose four index points to 103 after decline of two consecutive quarters in 2011, according to the Q1 2012 global consumer confidence survey from Nielsen, a leading global provider of information and insights into what consumers watch and buy. However volatile global economic conditions have impacted Hong Kong consumers’ investment strategy and outlook for 2012 remains conservative.
The Nielsen Global Survey of Consumer Confidence and Spending Intentions, established in 2005, tracks consumer confidence, major concerns and spending intentions. The latest round of survey conducted between 10th and 27th February 2012, interviewed more than 28,000 Internet consumers in 56 countries. Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism.
Drivers of Consumer Confidence
At 103 points last quarter, Hong Kong consumer confidence rose four index points after two consecutive quarters of decline in 2011. Yet, confidence levels still have not rebounded to the same level as a year ago (107 index points in Q1 2011). Last quarter’s improved consumer confidence was driven by consumers’ increase in optimism for the outlook on job prospects (+5%), state of personal finances (+3%) and spending intent (+3%) compared with the previous quarter.
“The HK$6,000 scheme by the HKSAR Government, the bonus payout at the beginning of the year, combined with the festive seasons made a positive impact on consumers’ optimism towards their state of personal finances and spending intent in the last quarter,” said Oliver Rust, Managing Director, Nielsen Hong Kong.
In the latest round of Nielsen’s global consumer confidence survey, consumer confidence rose in almost all global regions, with North America posting the biggest regional gain, up eight index points to 92. Asia Pacific was the world’s most optimistic region with an index of 103 (+4), and the Middle East/Africa rose two points to 97. Confidence in Europe rose one point to 72 and Latin America remained flat at 98 index points. India remained the world’s most optimistic country for the ninth consecutive quarter with a one point consumer confidence increase to 123, followed by Saudi Arabia (119), Indonesia (118) and the Philippines (118).
What are consumers concerned about?
While global economic conditions are more stable than in the depths of the European sovereign debt crisis late last year, underlying economic conditions are still fragile and fluid in many parts of the world. As a result, global consumers’ concerns over the economy and job security continue to increase quarter-on-quarter.
In Hong Kong, the economy (41%) continued to be the top concern among Hong Kong consumers at the start of 2012, followed by increasing food prices (29%). Although outlook for job prospects are seen to be improving, consumers’ concern over job security increased by 8% compared to a year ago. “Although the overall unemployment rate in Hong Kong has remained relatively stable in the recent quarters (3.3% in Q1 2012), much publicized news about local personnel layoffs from various multinationals fuelled consumer insecurity about the future job outlook,” Rust commented.
Retail Environment in Hong Kong
As consumer confidence picked up in the first quarter of this year, retail sales in Hong Kong also remained strong with a 17 percent year-on-year growth. Overall, the influx of 7.9 million mainland tourists who visited Hong Kong in Q1 2012 continued to be a main driving force behind the strong retail sales. Top growth categories in the first quarter are consumer durables (+30%), Jewelry (+19%) and Clothing / Footwear (+16%). Nielsen’s Fast Moving Consumer Goods (FMCG) Index also posted a 16 percent increase from a year ago driven by baby products (+43%), non-prescription medicine / health products (+28%) and Dairy / Bakery Products (+17%).
How do consumers spend their spare cash?
According to the latest round of results, saving for rainy days continued to be the top priority for Hong Kong consumers with three quarters (73%) claiming to put their spare cash into savings, up from 68 percent from the same period last year.
Amid volatile global economic conditions, Hong Kong consumers showed a smaller appetite for investing in the stock market, and also cut their discretionary spending compared to a year ago. Less than half of Hong Kong consumers surveyed (47%) chose to invest in shares/ stocks and mutual funds compared to 51 percent from a year ago. Stock investments had fallen to 43 percent in Q4 2011 before last quarter’s rebound, Rust observed.
“While consumers remained cautious about spending, year-on-year discretionary spending showed a decline for new clothes (-3%), new technology products (-5%) and home improvements (-2%). Spending outlook for 2012 will continue to remain conservative”, said Rust.
Banking and Finance Behavior of Hong Kong Consumers
The volatile global economy in the past six months made Hong Kong investors more cautious and conservative. The value of deposits (out of total liquid assets) increased among Hong Kong consumers to 80 percent last quarter, up from 59 percent a year ago, while the value of total investments has halved from 41 percent to 20 percent of total liquid assets, according the Nielsen’s latest Personal Finance Monitor.
The latest report showed value of stock investment decreased from 21 percent to 12 percent as consumers shifted their investment portfolio into foreign currencies (+16%) and time deposits (+10%). As the appreciation of RMB slowed in the last six months, consumers had less incentive to put their money into RMB related accounts.
“Overall, consumers are less optimistic about their investment outlook compared to a year ago,” said Mr. Rust. “We know that Hong Kong investors are highly adaptable and move quickly to change their investment portfolio when they have confidence in the global economy. Right now, the outlook is unclear so investors are cautiously taking a “wait and see” perspective until the winds change again. Consumers and investors are still seeking long-term capital appreciation over high risk speculation,” Rust commented.
Nielsen Holdings N.V. (NYSE: NLSN) is a global provider of information and insights 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.