"There wasn't enough positive news to inspire confidence among global online consumers in the second quarter," said Dr. Venkatesh Bala, chief economist at The Cambridge Group, a part of Nielsen. "Weak economic figures, slowing manufacturing performance and inflation in Asia, an intensifying debt crisis in Europe and continuing political instability in the Middle East combined with rising household expenses in the US have taken their toll on consumers' fragile confidence. Hopes for full global recovery in the next 12 months substantially weakened in Q2 as the majority of consumers around the world remained in a recessionary mindset."
The Nielsen Global Online Consumer Confidence Survey, established in 2005, tracks consumer confidence, major concerns and spending intentions among more than 31,000 Internet consumers in 56 countries. Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism.
In the latest round of the survey, conducted between 20 May and 7 June 2011, global online consumer confidence fell 3 index points from 92 to 89 - its lowest reading since Q4 2009.
Confidence in the US fell 5 index points to 78, 2 points lower than the 80 points recorded in the first half of 2009 at the height of the global recession.
"With rapidly rising fuel prices, inflationary pressures at check-out, continued woes in the housing market with home foreclosures and declining property values, unsettling weather patterns creating flooding and tornado damage and a stagnant job market, confidence among US consumers fell in the second quarter," said Todd Hale, SVP Consumer & Shopper Insights, Nielsen US
Regions of the Middle East/Africa and Asia Pacific posted the steepest declines of 12 and 9 points respectively compared to last quarter, but current figures are aligned with year-ago trends. And confidence levels in Europe (74) and Latin America (91) remained largely unchanged edging up 1 index point each.
Despite its 9 point dip, Asia Pacific remained the most optimistic region at 98 points, followed by Middle East/Africa at 94 points.
"Second quarter data revealed that consumers have retreated back into a recessionary mindset and they are tightening their belts again after the last 12 months of slowly improving, but cautious spending," said Dr. Bala. "According to the latest survey, consumer allocation intentions declined globally in all discretionary areas from investing in stocks and buying clothes to taking holidays and upgrading technology compared to three months ago. For the outlook to improve for the rest of the year, consumers globally will look to greater stability in food and energy prices, as has begun to occur recently, along with abatement of region-specific concerns."
In another indication of how consumers are prolonging recessionary sentiments, 58% of global online consumers said they are still in a recession - the most in the past year. Of those, more than half (51%) believe they will still be in a recession in a year's time. The number of Asia Pacific online respondents who said they are currently in a recession rose from 37% in Q1 2011 to 45% in Q2. And in Middle East/Africa, the economic recession lives on for 74% of online respondents - an increase of 9 points from 3 months ago.
Largest confidence declines in Q2 were recorded in Egypt (-10) and Saudi Arabia (-11), which had enjoyed the biggest increases in Q1 2011, but are trending consistently with year-ago performances. "In Egypt, post-revolution optimism subsided and was replaced by a more realistic view of the country situation and a higher awareness of the economical aspect of the after revolution period," said Ram Mohan Rao, managing director, Nielsen Egypt. "In Saudi Arabia, the Q1 surge in optimism caused by the additional cash injected into the market by King Abdullah was toned down as consumers were also hit by increasing food and rental inflation as a result of more liquidity in the market," said Arslan Ashraf, managing director, Nielsen Saudi Arabia.
In Greece, economic turmoil amid the escalating debt crisis and widespread domestic protests resulted in a further consumer confidence decline of four points in Q2 for the world's most pessimistic country where confidence levels dropped to 41 points.
While still below the European average of 74, France's eight point confidence boost from 61 to 69 points was a result of the economy's 1% growth in Q1 - the largest growth increase France experienced since Q2 2006. France's economic growth spurt at the start of the year exceeded expectations and the government is bullish about a 2% growth by the end of the year. This confidence has rubbed off on French consumers where 1 in 3 (33%) expect personal finances for the coming year to be good/excellent - up from 25% in Q1 2011.
Indian consumers (126 index), despite a five point quarterly decline, remained the most positive about job prospects and personal finances and have consistently reported the highest consumer confidence scores since the Nielsen consumer confidence survey began in 2005. "A host of factors are weighing heavily on the Indian consumer's mind. While still clearly the most optimistic across the globe, heated price inflation, fuel price hikes and an uncertain global economy are acting as constraints to a buoyant outlook," said Justin Sargent, managing director, Nielsen India. "We are likely to see adjustments to the purchase basket in terms of greater 'value-consciousness' guided by robust demand, but a large pull back in terms of overall spending is unlikely unless inflation continues unabated."
Eight out of 14 Asia Pacific markets posted quarterly declines in Q2 with steepest declines from Australia (-7 points) and Singapore (-6 points). Australia's index has been on the decline since Q3 2010. "Australian households are being hit hard with unrelenting price increases across the board. From 1 July, households will be hit by one of the biggest rises in the cost of living in decades - utility bills. These are set to soar with electricity, water and fuel prices all increasing," said Chris Percy, managing director, Nielsen Pacific. "And the January floods, which restricted supplies of fruit and vegetables, had lingering effects on produce costs, causing food prices to rise. Belt-tightening is the norm for many households as price increases erode family budgets."
Malaysia, New Zealand, Philippines and South Korea posted quarterly confidence increases and Hong Kong remained flat. China's consumer confidence declined three points quarterly to 105 and is four points off its year ago index of 109. "The slight drop in consumer confidence in China is reflective of inflation, which is still a top-of-mind issue for consumers.
While inflation has continued to creep up in the last three months, there aren't any signs of slowdown in consumption - even in discretionary categories, as observed in the second quarter of 2011. The continued strength in domestic consumption is a reflection of continued overall optimism in the economy, driven by growth in income levels," said Karthik Rao, managing director, Nielsen Greater China.
Twelve months ago, 35% of global online consumers said the present was a good time to buy the things wanted and needed, but this figure dropped to 27% in second quarter with significant pull back among North American and Asia Pacific consumers. At the start of this year, 27% of North American consumers said it was a good time to buy, but this receded to 20% last quarter. Likewise, one year ago, 40% of Asia Pacific consumers felt it was a good time to buy things needed and wanted, but this figure fell to 32% in Q2.
"On the US retail front, the top 20% of households have exited the recession, while all other households are showing continued restraint in shopping trips and spending," said Hale.
"Consumer-packaged-goods dollar sales were off 0.4% for the 52-weeks ending June 11, 2011, while dollar sales for the latest quarter within that 52-week period were up 0.5% - the second consecutive quarter of at least modest growth."
More consumers globally are feeling cash strapped as cost of living expenses and rising food and energy inflation continue to squeeze household budgets. Rising food prices was again consumers' top global concern, surpassing the economy as the top concern for the second quarter in a row. 31% of US consumers said they have no spare cash for discretionary spending, along with 25% of Middle East/Africa consumers and 22% of Europeans.
The Nielsen Global Online Survey was conducted between 20 May and 7 June 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 behaviour of respondents with online access only. Internet penetration rates vary by country.
Nielsen uses a minimum reporting standard of 60% 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.
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. For more information, go to www.nielsen.com.
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