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Indian Consumer Confidence Dips in Second Quarter

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Indian consumers continue to remain the most optimistic globally, but their confidence levels have dropped from the first quarter of 2011, down 5 points to 126 index points from 131 in the previous quarter according to the latest edition of the Nielsen Global Online Consumer Confidence Survey, which tracks consumer confidence, major concerns and spending intentions among online consumers. Infact this is the first time since Q4 2009 that the Index has dipped in India.  In this quarter, Philippines with 115 points and Indonesia with 112 points come in at second and third place respectively. The first seven out of the top ten optimistic countries surveyed hailed from Asia Pacific.

“Indian consumers have seen no moderation in inflation during the start of the year. Rising food and fuel prices have hit households and though consumer confidence remains high, it has taken a beating given the macro economic factors prevailing in the country,” said Justin Sargent, Managing Director-Consumer, India, Nielsen.

Optimism over jobs, personal finances

When it comes to job prospects in the next twelve months, Indians continue to be the most optimistic globally as they were in the first quarter of this year. However, at 86 percent their optimism has dropped compared to the last quarter (91%). Malaysia (77%), Singapore (70%) and Thailand (69%) follow India in their optimism over job prospects in the coming year.

Given their overall optimism over local job prospects, it is not surprising that Indians are also fairly optimistic about the state of their personal finances in the next twelve months. Indians, in fact, top the global ranking for countries that are most optimistic about their personal finances. Eight out of ten Indians are optimistic about their personal finances in the next twelve months, exhibiting a small dip in confidence since the last round of the survey. Indonesia (79%) and Philippines (73%) are the second and third most optimistic nations regarding the state of their personal finances in the coming twelve months.

Despite the overall optimism pervading the country, according to the study, Indians are going back to being a little cautious about spending than they were in the last quarter. Of the Indians surveyed, 56 percent believe that it was a good time to buy the things that they felt they wanted, compared to 61 percent in the previous quarter.

“Inflationary pressures are weighing on Indians, they may be optimistic about their jobs and the state of their personal finances but inflation is definitely making them think about their spending habits and they are beginning to tighten their purse strings again after we saw them spend in the last quarter,” said Sargent.

A ‘savings’ oriented economy

Typically, Indians list Savings as a top priority, that is the case this time too, but we see a significant dip in the utilization of spare cash with just 54 percent of Indians intending to put aside their spare cash in savings, down from 65 percent in the last quarter, after meeting their essential living expenses. This could be largely due to reduced amount of spare cash with rising prices of essentials. 

The utilization of spare cash by Indians on their other interests has also dropped, with their spend on new clothes (down from 42 percent to 38 percent), holidays (down to 34 percent from 40 percent) home improvements (down to 33 percent from 39) new technology products (down from 44 percent to 32 percent) and retirement funds (down from 24 percent to 20 percent.).

Contrastingly to the previous quarter, spare cash being spent on repaying loans has gone up marginally and the number of people who said that they had no spare cash has risen from 4 percent to 7 percent.

 “Inflation weighs heavily on the Indian consumer who seems to have had to relook at money management priorities, so much so that the top priority of putting spare cash in savings has taken a hit.  Also Indian consumers are indicating they have had to completely evaluate  other expenditures and make significant cuts,” said Sargent.

Household expenses take a hit

As inflation in the country rises, Indians have had to reduce expenses at home in order to cope with rising prices of essentials. Compared to this time last year, more than half of the Indians surveyed said they were forced to cut their spends on new clothes, at least half the Indians surveyed also looked at cutting down expenses on gas and electricity. The other expense that at least a quarter of people surveyed said they had to relook at to deal with rising household expenses were telephone expenses,  while more than a third said they had to cut spending on upgrading technology, taking a break and out of home entertainment. 

With the global economic recovery being more uneven than anticipated, compounded by surging commodity costs and weaker domestic equity markets, more Indians surveyed (42%) in the second quarter of 2011 believe that the Indian economy is in a recession compared to the last quarter when only 36 percent believed that the economy faced recession. Out of those who think that India is in a recession, 45 percent feel that the country will emerge from the recession in the next 12 months, down 6 percent from the previous quarter when it was 51 percent who believed that the country will be out of recession. On the global charts, Indians rank first on the list of countries that believe that they will emerge from the economic recession in the next twelve months.

Looking Ahead: Major Concerns for Indians

Echoing global sentiment of alarm on rising food and commodity prices, Indians too are most concerned about increasing fuel prices (13%) followed by increasing food prices (11%).

Other concerns that will dominate the Indian psyche over the next six months is work/ life balance and job security down to nine percent from ten percent in the last quarter.

“With inflation showing little signs of ebbing and global commodity prices soaring, Indians will be looking at cutting their living expenses and reallocating their discretionary spends, but optimism over local job prospects and the state of their personal finances should help them retain their overall confidence. Having said that, caution is bound to be seen, especially given their savings-oriented outlook in an uncertain macro-economic environment,” concluded Sargent.

Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism. Global confidence levels dropped three points in the second quarter of this year to an index of 89 driven by rising global food and commodity prices.

About the Nielsen Global Consumer Confidence Survey

The Nielsen Global Online Survey was conducted between May 20th and June 7th, 2011 and polled more than 31,000 consumers in 56 countries throughout Asia Pacific, Europe, Latin America, the Middle East, Africa and North America. 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%.This Nielsen survey is based on the behavior of respondents with online access only.Internet penetration rates vary by country.Nielsen uses a minimum reporting standard of 60 percent Internet penetration or 10M online population for survey inclusion. The Nielsen Global Online Survey, which includes the Global Online Consumer Confidence Survey, was established in 2005.

About Nielsen

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