Increasing food prices continue to be top concern for consumers, more target to invest spare cash in stocks / mutual funds to grow wealth.
 
After a surge of 8 points in the first quarter of 2011, Hong Kong consumer confidence remained at 107 points in the second quarter of this year, according to the Nielsen's Global Online Consumer Confidence Survey.

Global online consumer confidence declined to its lowest level in six quarters at 89 points as economic recovery hit a stumbling block and recessionary jitters again reverberated around the world. Confidence in Asia Pacific dropped by 9 points, yet it still remains the most optimistic region.

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. The latest round of survey was conducted between May 20 and June 7, 2011.

Hong Kong consumer confidence remained at 107 points in the second quarter of 2011, an increase of a total of 26 index points from two years ago.

Regionally, Asia Pacific and Middle East / Africa posted the steepest declines of nine and 12 points respectively compared to last quarter. Yet, Asia Pacific remained the most optimistic region at 98 points, followed by Middle East / Africa at 94 points. Confidence levels in Europe (74) and Latin America (91) remained largely unchanged edging up one index point each.

Drivers of Consumer Confidence in Hong Kong

The stability in Hong Kong's consumer confidence was driven by consumers' optimism towards their spending intent (+1%) and state of personal finances (-1%) in the latest quarter which have offset the slight decline in outlook for job prospects (-4%). 

 "Although the overall unemployment rate in Hong Kong has remained relatively stable in the recent quarters (3.5% in Q2 2011), unemployment amongst the younger work force remains high (+18.6% vs. year ago) as competition for jobs intensifies due to new local university graduates and talent from Mainland," said Oliver Rust, Managing Director, Nielsen Hong Kong.

Retail Sales on the Rise

In the second quarter of 2011, total retail sales in Hong Kong increased by 24 percent compared to last year. The strong retail sales growth was mainly driven by the top-picks from the 12.7 million of Mainland tourists such as jewelry (+50%), clothing / footwear (+28%) and consumer durables (27%).

In addition to the large contribution from these mainland tourists, locally driven necessities like supermarkets also saw good demand. According to Nielsen's FMCG index, sales of fast moving consumer goods (FMCG) grew at 13 percent from a year ago. 

The growth, in part, was driven by the increase in prices of products as well as shoppers' intent to up-trade to premium products.  Underlying the strong retail growth, inflation was seen across various categories in the market such as food (+7.2%), transport (+5.0%) and alcohol / tobacco (8%).

Top Concerns for Hong Kong Consumers

According to the survey, inflation in food prices was still the key issue for local Hong Kong consumers as 40 percent of online respondents claimed this as their top concern for the next six months, surpassing concerns over the health of the economy (27%).

While local consumer confidence continued to remain buoyant, job security (12%), for the first-time ever, was out of the top five concerns of Hong Kong consumers since the tracking of the survey, indicating that Hong Kong consumers'  have now shifted their concerns from economy and job security to inflation in the market. 

With consumers having less concern over the economy and their jobs, they are more concerned about their work/life balance (27%), health (16%) and their parents' welfare and happiness as well as increasing utility bills (14%).

"With the continuous surge of oil prices globally, public transportation across Hong Kong, such as the Mass Transit Railway (MTR), buses and taxis have increased their fares in the last couple of months thereby putting more pressure on consumers for their daily transportation expenses (+5% vs. Q2 2010), and as a result, consumers are tightening their wallets to save on utility expenses," Rust commented. 

As ways to cope with inflation, consumers have cut their expenses on out-of-home dining and technology upgrades. As many as 39 percent of respondents also said that they have reduced their grocery shopping by switching to cheaper grocery brands.

According to Nielsen information, there has been a trend of growth likely driven by buying more economical choices in food categories. In addition, the frequency of shopping for fresh food has seen a decline driven by rising prices.

Regionally, Asia Pacific consumers were most concerned about increasing food prices which further squeezed their constrained family budgets, which one-third of consumers regard it as their top concerns. As the most optimistic region globally, Asia Pacific consumers have a higher concern for their work/life balance (23%) over the economy (20%).

How to use spare cash

As a result of inflation across various categories, Hong Kong consumers plan to trim down their discretionary spending from last year, especially on high-ticket items such as holidays (-2%), out-of-home entertainment (-4%) and new technology products (-7%). 

However, with the spare cash from the monthly income, consumers have expressed desire to put less into savings (-7%), likely due to the low interest rate on deposits, and more towards investments in stock / mutual funds (+1%).

"While Hong Kong consumers remain confident for the days ahead, the effects of inflation will continue to place pressure on them and as a result lead them to tighten their purse strings. Therefore, marketers should remain cautiously optimistic about the market despite the buoyant sentiment. The key is to address to the unmet demands and needs of customers amid this ever-changing market place," Rust said.

About the Nielsen Global Online Survey

The Nielsen Global Online Survey was conducted between May 20 and June 7, 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