Consumer confidence is back with a bang

ACNielsen Apac consumer confidence & opinions survey

Asian consumers put SARS, terrorist attacks and war behind them and assert their faith in their economies for the next year. What's more, they say they'll be voting with their wallets

What Asia experienced in 2003 was unprecedented: the war on Iraq, terrorist attacks and the outbreak of Severe Acute Respiratory Syndrome (SARS).

Is the worst over? According to findings of the latest ACNielsen Asia-Pacific Consumer Confidence Study, there seems to be light at the end of the tunnel and consumers in the region are more optimistic about the economy and the future.

The Asia-Pacific Consumer Confidence Study surveyed 7,230 consumers in 13 Asian markets online. Apparently, consumers have begun feeling more confident about the economy over the past six months and are more optimistic about the economy strengthening further in the coming 12 months.

The highest score of confidence is in India where 89 per cent of Indians believe their local economy will further improve. In Thailand, 84 per cent think the same, followed by 76 per cent in Malaysia.

Hong Kong ranks fifth with 67 per cent of its citizens optimistic about a recovery. These scores are all well above the regional average and are far more encouraging when a similar survey was conducted in May 2003.

"The SARS and war on Iraq caused a real setback to consumer confidence a few months ago and led many to think that a rebound in 2003 would be a dream," says Sarang Panchal, Executive Director, ACNielsen India.

"However, as our findings show, cities like Singapore, Hong Kong and Taiwan that were hit by SARS have actually regained their momentum relatively quickly, and the people in India as well as Thailand also sound particularly upbeat about their future."

Increased consumer confidence usually leads to stronger spending desires. When asked how their spare cash will be utilised after covering essential living expenses, nearly 90 per cent of Asian consumers said they would spend it.

The other ways they said they will use the money are saving it and repaying debts. Across Asia, items on the top of people's shopping lists are new technology gadgets "" including PCs, mobile phones, digital cameras and flat screen TVs "" followed by out-of-home entertainment and clothing.

In India, 90 per cent of consumers said they intend to spend their disposable incomes on non-essentials. The appetite for spending is also much stronger than the regional average.

On an average, Indian consumers are more likely than the rest of their counterparts in the Asia-Pacific region to spend their incomes on home renovation or relocation (46 per cent vs 28 per cent), new technology (45 per cent vs 42 per cent), apparel (41 per cent vs 35 per cent) and short holidays (40 per cent vs 32 per cent).

Fewer Indians are likely to spend on out-of-home entertainment and international holidays than consumers around the Asia-Pacific region.

Instead, people in Singapore, Taiwan as well as Hong Kong are more likely to be spending on international travel, indicating a release of the pent-up desire to travel after SARS.

A near-equivalent proportion of Indian consumers also intend to divert their financial resources towards the repayment of debt such as personal loans, credit card payments and housing loans.

Meanwhile, similar to the last survey, people's intention to save their money with a view to maintaining liquidity remains strong, although regionally the appetite for investment in shares and portfolio instruments has also grown.

While maintaining their traditionally-high preference for fixed deposits, consumers in India indicate a markedly stronger disposition towards more dynamic investment options such as equities and other financial securities as part of an investment portfolio.

When it comes to major concerns for people, health overtook the economy and tops the list of worries this time compared to the May survey.

Across Asia, 63 per cent of all respondents are concerned about their health, with Hong Kong ranking the first at 74 per cent, nine points over the regional average but six points less than the last survey.

There is also growing concern about health in markets like Korea (73 per cent compared to 60 per cent), New Zealand (65 per cent compared to 52 per cent) and Australia (66 per cent compared to 57 per cent).

Indians, though concerned about health, cite job security and terrorism as bigger concerns with 37 per cent identifying job security as a concern versus the regional average of 30 per cent. Also, 17 per cent marked terrorism as a cause for concern vis-à-vis the regional average of 6 per cent.

"SARS has clearly raised people's consciousness about health. But environmental factors and mass media reports on such issues as urban obesity have also stimulated concern for health," Panchal adds.

"As fear about war and the economy subsides, people tend to switch their focus from external to personal issues."

Though ranking second among concerns, worry about the economy has declined compared to six months ago; 12 out of 13 markets recorded either a flat or decreasing number of people who are concerned.

The Philippines is the only country that has registered growing concern with 75 per cent of its people expressing concern about the economy, a seven-point increase from the last survey.

Consumers are more confident about the economic outlook. Indians, for instance, are the most optimistic about economic performance over the next year (89 per cent) with fewer Indians noting the economy as an area for concern compared to the last round (50 per cent vs 56 per cent).

But they still cite job security as their chief concern, with 60 per cent of Indians recording some concern about job security.

"The situation in India is quite understandable. Although the local job market is improving and the economy is gaining firmer footing due to improved corporate and capital market peformance, what people experienced in the past years still makes them uncomfortable about job security. Moreover this improved performance has come through a sustained productivity and profitability drive by companies that has entailed a stringent watch on headcounts and wage bills," says Panchal.

"People are still waiting to see a sustained pattern of growth before concerns over job security will recede significantly."

On the other hand, globalisation, which is controversial in other parts of the world, is accepted by Asians for its perceived benefits.

On average, 90 per cent believe globalisation helps them be more informed with access to news, entertainment and information around the world; 77 per cent think it would bring more job opportunities; 72 per cent say it helps break down borders and fosters understanding and tolerance of other cultures and societies.

The other side of the coin is that many consumers believe globalisation would make local economies more vulnerable to trends and events happening elsewhere in the world (88 per cent), change people's values and make life too fast and impersonal (64 per cent), and even pose threats to local traditions and cultures (61 per cent).

"Developing markets seem to be more receptive of globalisation. In markets like Australia, New Zealand and Japan, people hardly see benefit from globalisation," Panchal says.

"Japanese remain the least optimistic consumers. They are on the low end of various dimensions."

In India, consumers hold a moderate to good view towards all dimensions of globalisation. More Indians, for instance, perceive that globalisation benefits them by granting them access to the same quality of products available to anyone else in the world and brings in greater job and career opportunities. Fewer consumers in India perceive globalisation to be a threat to their local tradition and culture.

As far as concern for the environment goes, it is fairly consistent among all Asia-Pacific consumers, except for Singaporeans as well as Kiwis. Across Asia-Pacific, consumers tend to think that local governments are not doing enough to protect the environment.

Instead, consumers are more willing to take their own initiatives, with Australians and Kiwis showing up as the biggest recyclers of papers and plastic, Filipinos are the biggest supporters of energy conservation and Indians, very few of whom (15 per cent) believe that the government is doing enough to protect the environment, are the most positively predisposed shoppers of environment-friendly products. People in Hong Kong are more moderate, yet they seem to be getting more environment friendly.

When asked about their perceptions of the US-led war against terrorism, Indian comsumer opinon was in line with regional consumer opinion, which felt that random terror attacks would continue with or without intervention and that the coalition's war against terror was unlikely to succeed.

Despite this dismal view of global safety and security, 73 per cent of consumers support the notion that confrontation is not the answer and that a peaceful solution must be found.

The ACNielsen Asia-Pacific Consumer Confidence Survey is a regular syndicated online consumer survey used by many prominent marketing companies in the Asia-Pacific region for gathering information from regular users of the Internet across Asia-Pacific on their attitudes and preferences and consumption of media, products and services across different markets.

The sample represents a consumer universe that controls a significantly higher discretionary expenditure and forms an important barometer of the health of the economy and public sentiment. These are the findings of the latest round of this regular survey. In this round, the survey "" exclusive to Business Standard "" also captured consumer sentiment with regard to topics of global importance like globalisation, the environment and global safety and security.