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April 22 2009
Hong Kong
It’s been over six months since the global financial crisis broke out. Despite the various fiscal stimulus plans put on the table by governments around the world, the business outlook continues to be bleak and there is no sign of consumer confidence picking up globally as evidenced by the Nielsen Business and Consumer Confidence Report.
According to the Nielsen Hong Kong Commercial Finance Monitor, the confidence level among SMEs in Hong Kong dropped by 30 percent (or 17 points) compared to a year ago, with the SME Confidence Index sliding from 57 to 40 this time round. Corporates with a bigger employee size than SMEs also registered a low Index of 38.
“Both SMEs and Corporates are concerned about the HK and global economic downturn as well as the decrease in revenue as they conduct their business in 2009,” said Justin Garrett, Financial Services Director, The Nielsen Company, Hong Kong. “It’s worth noting that SMEs in Hong Kong consider the China economic downturn a major challenge to their business, while Corporates are facing increased difficulty in securing loans from banks.”
Compared to SMEs, Corporate decision-makers seem to be more pessimistic, with 90 percent considering the business environment in 2009 to slow down (vs SMEs 76%), and 63 percent skeptical about their own company’s financial performance (vs SMEs 54%) as a result of the weakening macro economic outlook. A respective 39 percent and 38 percent of the Corporate and SME decision makers therefore plan to slow down their investments in operations this year.
Across all sectors surveyed, Transportation/Communications, Hotel/Real Estate and Manufacturing are among the most pessimistic.
Similarly, the level of confidence among consumers continues to tumble in Hong Kong and around the world, with the latest Nielsen Hong Kong Consumer Confidence Index reaching a new low of 70, a steep decline by 18 points from the 2nd half of 2008. With an index score below the global average for the first time, Hong Kong now ranks 24th globally, down eight places from 16th in the second part of 2008.
“Companies and consumers globally have been battered and bruised by an onslaught of bad news in the last six months. The collapse of long-established financial institutions globally, widespread reports on the mini-bonds issue, depreciation of wealth and investment as well as rising unemployment rates have combined to dampen Hong Kong people’s confidence,” added Mr Garrett.
People are finding little reason to be upbeat. Today, three quarters of consumers agree that Hong Kong is now in an economic recession and over half think it is not likely that HK will be out of the recession in the next 12 months, which is a major shift in their sentiment compared to a year ago.
In tandem with falling confidence levels, Hong Kong people’s perception of local job prospects over the next 12 months is at all-time low with over nine in 10 thinking job prospects aren’t looking good. Additionally, nearly 60 percent are skeptical about the state of their personal finance in the months ahead.
Amid a worsening market sentiment, The Economy (52%) and Job Security (48%) are now the biggest concerns for Hong Kong people - with the level of concern around Job Security double that of 2008.
Globally, consumer confidence is not looking better six months after the outbreak of the financial turmoil. The latest survey reveals that global consumer confidence has taken a further beating, dropping from its previous low of 84 to 77 this time round, the lowest since the Index was first established by The Nielsen Company in 2005.
Of the 50 markets surveyed, 48 have recorded a decline in their Consumer Confidence Index compare to the second half of 2008 and more consumers around the world think their markets are slipping into a recession.
The once most up-and-coming BRIC markets (Brazil, Russia, India and China) were also no exception, recording a decline in the level of confidence among their consumers. Only India and China managed to maintain their top 10 rankings.
Spending behaviors
Saving for a rainy day has become a top priority for Hong Kong people with three quarters claiming to put their spare cash into saving. The ‘bubble burst’ of the investment market has also shaken Hong Kong people’s confidence in putting their hard-earned cash into the stock market, with only a third still investing in shares or stocks and mutual funds if they have the spare cash – compared to the peak of 58 percent back in 2007.
Hong Kong consumers have apparently switched into penny-pinching mode in their daily lives with 63 percent admitting to have changed their behavior in order to save on household expenses. The top 10 ways to cut spending by Hong Kong people include:
“From another major study of Nielsen, we have observed that more Hong Kong people are now traveling on public transportation and cutting down on taxi rides,” added Mr Garrett. “Besides cutting back on travels, people are also choosing lower cost destinations such as Greater China and Thailand.”
Yet people are not entirely holding back when there’s a bargain to be had. As the Nielsen Global Consumer Confidence Survey indicates, people’s penchant for spending continues from 2008 with about a third of consumers considering the next 12 months a good time to buy the things they want or need. After covering essential living expenses, Hong Kong people plan to resume spending on areas that were cut back, such as holiday/vacation (36%), out of home entertainment (28%), new clothes (24%), and new technology gadgets (20%).
Hong Kong people are considered relatively cashed-up compared to their global counterparts, with only five percent claiming not to have spare cash once essentials are covered, compare to the global average of 13 percent, and among the world’s lowest.
About The Nielsen Company
The Nielsen Company is a global information and media company with leading market positions in marketing information, media information, online intelligence, mobile measurement, trade shows and business publications (Billboard, The Hollywood Reporter, Adweek). The privately held company is active in more than 100 countries, with headquarters in New York, USA. For more information, please visit, www.nielsen.com
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