Consumer confidence is a measure of the market conditions and a rise and fall in it is an indication of the direction the economy is taking. In the recent leg of the Nielsen Global Consumer Confidence Index, which measures consumer confidence, major concerns and spending habits in 51 countries, consumer confidence in India fell by 11 points to 122, the lowest level in the last five runs of the survey. Forty-two per cent of Indian online consumers who took part in the survey also believe that their country is currently in an economic recession. Globally, the latest Nielsen Consumer Confidence Index dropped to 88 "" down six points in the last six months "" which is the largest single drop the Index has recorded in the last three years. India dropped from 133 points in the last leg of the survey in November 2007 to 122 points. Across countries, the US suffered the biggest fall in the Confidence Index, dropping 17 points.
Overall, Asia Pacific consumers are still amongst the most confident in the world. Five out of the global top 10 countries hail from Asia Pacific and the overall total for the region is one point above the global average. However, for many emerging countries in Asia that have enjoyed the fruits of economic growth and boom in recent years, the last six months have been a wake-up call, as consumers find themselves struggling with double-digit inflation and rising unemployment rates for the first time in a decade.
The last six months have been a turbulent period for the global economy and this has impacted the growth in the Indian economy as well. The rising crude oil prices, inflation, growing unemployment rates, have all diminished the consumer spending powers and have in a way shaken the Indian consumer confidence.
Optimistic few
Despite the 11-point drop in consumer confidence, Indian consumers continue to be the most confident in the region. India ranked second with 122 points, just behind Norway, which scored 129 points, on the Nielsen Consumer Confidence Index. We are, one of the few markets that stand to gain from the grim economic outlook. 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.
Jobs & finances
Indians are optimistic about the local job prospects over the next 12 months. With a figure of 86 per cent, Indians are the second most optimistic people where the job market is concerned over the next 12 months. Twenty-six per cent of Indian respondents consider job prospects in the country "excellent" and 60 per cent respondents consider the job prospects "good".
In spite of an alarming inflation rate, India is still a growing economy with the GDP ranging around 9 per cent. There is still demand for talent in the market and especially with the entry of various multinational brands, the job market looks lucrative.
The promising job prospects for Indians over the next 12 months makes them confident about their personal finances over the same period. Twelve per cent of Indian respondents consider their state of personal finances "excellent" and 67 per cent consider it "good" in the next 12 months. At 79 per cent, in this positive frame of mind, India along with Denmark and Indonesia figures in the list of the most optimistic countries where personal finances are concerned.
Good job and financial prospects have sufficiently loosened the Indian purse and 45 per cent of respondents surveyed are optimistic that it is the perfect time to buy things that they would want or need. Indians are shopping more and are buying well known brands, as seen in the recent Luxury Brands survey done by Nielsen, where India figured amongst the top three most brand conscious countries of the world.
This shows that good jobs, hefty pay packages, and global exposure to lifestyle are pushing the Indian consumer towards luxury items. So even when there is an economic recession globally, Indians are splurging and are optimistic about their finances.
In recession now, or heading that way, 58 per cent of Indian respondents do not think that their country is in an economic recession now. When asked, out of these 58 per cent, 38 per cent consider a global recession likely to hit India in the next 12 months. Regionally, in Asia Pacific, two in five (42 per cent) of consumers believe that their country is currently in the midst of a recession.
During times of economic slowdown, Indian consumers rank inflation as their biggest concern (69 per cent), this being the 10th highest percentage globally for a country worrying about inflation. India's inflation rate of 8.75 per cent is the highest in several years. The rising prices of international crude oil, food, and other manufactured goods have resulted in such high inflation rates. In a country where economies are growing on an unprecedented scale, concerns about inflation are understandable because this may mark a stop in the Indian growth story.
Other concerns bothering Indians in case of a downturn in economy are unemployment (46 per cent), interest rate rises (44 per cent - seventh highest globally), political instability (29 per cent), falling property prices (12 per cent), civil conflicts (11 per cent), and strikes (9 per cent).
The spare cash kitty
Compared to the last leg of the survey, the percentage of people putting their spare cash into savings has increased by 5 per cent and the percentage investing in shares and mutual funds has dropped by 3 per cent. Today, Indians are more careful of the financial risks that they want to undertake.
The fluctuating market conditions has curbed the risk-taking appetite and has made Indian consumers opt for savings rather than take a chance with their money on the market. According to the survey, 59 percent of Indians put their spare cash into savings and 48 percent invest in shares of stock and mutual funds, this being the fourth highest percentage globally.
It is interesting that despite a downturn in economy, concerns about inflation, and so on, the percentage of Indian respondents who do not have any spare cash after their monthly essentials have been paid for has remained at 4 per cent, the same as the last leg of the survey. This shows that majority of Indian consumers who took part in the survey, have money left even after meeting their essential expenses.
Apart from the changes in saving and investment patterns, spending on holidays and vacations has increased by 4 to 37 per cent, which shows the growing interest of Indians to travel and see the world. Incidentally, the amount spent on home improvements (27 per cent) and new technology (27 per cent) has also been impacted by the rising inflation rates and they have dropped by three and two percentage points respectively.
Paying off debts/credit cards/loans (35 per cent), new clothes (34 per cent), out of home entertainment (28 per cent), and retirement fund (22 per cent "" fifth highest globally), are some other areas where Indians spend their spare cash on.
| How it was done Nielsen Global Consumer Confidence Index conducted by The Nielsen Company covers Internet users around the world every six months, representing a global online population of about 1 billion consumers. The survey has been gaining traction since it was launched as an Asia Pacific initiative about five years ago, before "going global" at the end of 2004. The latest survey, conducted in April 2008, polled 28,253 Internet users in 51 markets from Europe, Asia Pacific, North America and west Asia. The survey was conducted online across Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, the Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Pakistan, the Philippines, Poland, Portugal, Russia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, the UAE, the United Kingdom, the US, Venezuela and Vietnam. About 500 people were interviewed in each country. Three questions are used to calculate the consumer confidence index. They relate to job prospects in the next 12 months; the state of the respondent's personal finances in the next 12 months; and, based on the cost of things and the respondent's personal finances, whether or not it is a good time to buy things he wants and needs. The scale of answers to all three questions are: Excellent, Good, Not so good and Bad. To calculate the index, each response was given values: Excellent (200), Good (133.3), Not so good (66.6) and Bad (0). Using these values, the average of the three questions was taken for each respondent. The index for each country was calculated by taking the index average for each respondent in that country. An index value of 100 corresponds to an average halfway between "Good" and "Not so good". |
