Economy returns as top concern for Hong Kong consumers, two-thirds of Hong Kong companies expect slowdown in 2012.

Consumer confidence in Hong Kong fell five index points last quarter to 99 index points, down from 107 index points at the start of last year, according to the fourth quarter 2011 global consumer confidence survey from Nielsen, a leading global provider of information and insights into what consumers watch and buy.

Business confidence in Hong Kong also fell to its lowest level in two years as two-thirds of Hong Kong companies prepared themselves for a slowdown in 2012, according to the latest Nielsen Commercial Finance Monitor.



The Nielsen Global Survey of Consumer Confidence and Spending Intentions, established in 2005, tracks consumer confidence, major concerns and spending intentions. The latest round of survey conducted between 23rd November and 9th December 2011, has interviewed more than 28,000 Internet consumers in 56 countries. Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism.

At 99 points last quarter, confidence levels in Hong Kong retreated to the same level as a year ago (Q4 2010). "Last quarter's further drop in consumer confidence was mainly driven by a depressed employment outlook for 2012 as confidence in the job market fell to a two-year low," said Oliver Rust, Managing Director, Nielsen Hong Kong.

At the end of 2011, less than half of Hong Kong consumers (42%) were optimistic for job prospects compared with 66 percent in Q1 2011 and 55 percent in the previous quarter (Q3).



"Although the unemployment rate in Hong Kong has remained stable, the volatile global economy has triggered many multinationals, especially in the finance industry, to reduce personnel numbers and this is affecting overall job confidence in 2012," said Rust.  More than half (56%) of Hong Kong online consumers described their state of personal finances for 2012 as excellent / good, down from 59 percent in Q3 2011.   "However, despite consumers' pessimism for the job market, spending intention in the next 12 months looks to remain stable for the year ahead," said Rust.

In the latest round of Nielsen's global consumer confidence survey, confidence declined in 35 out of 56 markets measured. Overall global consumer confidence increased by one index point to 89 in Q4, while Asia Pacific (99) and Latin America (98)  remained as the world's most confident regions with quarterly increases of two and one point(s), respectively. India was the world's most optimistic market for the eighth consecutive quarter with a one index point increase at 122, followed by Indonesia and Philippines at 117.

What are consumers concerned about?

As the outlook for the economy remains uncertain at the end of the year, the economy (39%) replaced food prices as the top concern among Hong Kong consumers last quarter.  "Increasing food prices had dominated Hong Kong consumers' top concerns for the past two quarters but with Europe's challenging economic conditions in the second half of 2011 bringing renewed vulnerability and fragility to consumers and financial markets globally, more consumers fell uncertain about the future outlook, and thus the economy has quickly became top-of-mind once again in the last quarter," said Rust.

Increasing utility bills (35%) was the second main concern for Hong Kong consumers followed by increasing food prices (30%). 



"While food price inflation remains at 8.1 percent last quarter, current proposals to raise tariffs by Hong Kong's two electricity suppliers is making consumers further anxious about rising utility bills in 2012 which could significantly increase their household budget," Rust commented.



How do consumers spend their spare cash?

Saving for the rainy days continues to be the top priority for Hong Kong consumers  with three quarters (72%) claiming to put their spare cash into savings, up from 66 percent from the the same period in 2012. Less than half of Hong Kong consumers surveyed (43%) choose to invest in shares/ stocks and mutual funds compared to 56 percent from a year ago.

"While we didn't see any significant restraint last quarter on discretionary spending trends, some areas are down compared to a year ago such as investments (-13%), out-of-home entertainment (-3%) and new clothes (-4%). The spending out for 2012 is likely to be conservative", said Rust. "A recent fluctuation in the stock market has deterred some consumers from putting their spare cash into the stock market. Looking ahead for the next six months, Hong Kong consumers said they will save the majority of their spare cash for the next six months, followed by investments (43%) and holidays (43%)."

While consumer confidence declined last quarter, retail sales remained robust with a 25 percent year-on-year increase, strongly boosted by a 24 percent increase in mainland Chinese shoppers. Top growth categories last year are jewelry (+47%), consumer durables (+28%). Nielsen's Fast Moving Consumer Goods (FMCG) Index posted a 15 percent increase drive by baby products (+44%) and non-prescription medicine / health products (+28%).

Private consumption expenditure also rose from 0.7 percent in 2009 to 5.2 percent last year driven by services and non-durable consumer goods.

Hong Kong Business Confidence: Drops to lowest level in two years

According to the Nielsen Commercial Finance Monitor, business confidence among SMEs (small to medium enterprises) in Hong Kong dropped 12 index points to 96 index points year-on-year, while Corporates registered a steeper annual drop in confidence of 22 points to 98 index points.  Fifty eight  percent of SMEs and 68 percent of Corporates said they expected a slowdown in this year's business environment due to the fragile and volatile global market conditions.  Hotels/real estate, finance and wholesaling are less optimistic about 2012's business outlook for their dependency on the domestic consumption.



"Interestingly, while companies may be bracing themselves for a slowdown this year, they are still cautiously optimistic regarding financial performance," noted Rust.  "Only one third expected any decline in financial numbers – with two-third surveyed anticipated their companies' financial performance to remain its current level or improve in 2012.

Investment in operations is expected to remain unchanged for 57 percent of SMEs and 51 percent of Corporates. Trading, wholesale and restaurants are sectors that are less likely to invest in operation for the increasing operation cost and anticipated decreasing demand for the year ahead. Investment in human resources is also expected to remain steady for around 80 percent of companies in 2012.  "Companies are being conservative about investment in operations and personnel. Companies aren't expecting a big growth year in 2012 but they aren't planning any drastic cutbacks in budgets either. They are in a holding pattern," said Rust.

Among SMEs, a declining local economic climate (18%) is their main challenge this year considerably outweighing other factors including global macro economic condition (9%) and rising raw material prices (9%), while the impact of Europe's economy (21%) is the main concern for Corporates in 2012.

SMEs refer to small & medium enterprises with an employee size of 100 or smaller for manufacturing sector and 50 or smaller for other sectors; Corporates refer to manufacturing sector with more than 100 employees and other industries with over 50 employees.

About the Nielsen Global Survey
The Nielsen Global Survey of Consumer Confidence and Spending Intentions was conducted between November 23 and December 9, 2011 and polled more than 28,000 online 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 Survey was established in 2005.

About The Nielsen Commercial Finance Monitor
The Nielsen Commercial Finance Monitor was first established in 2007. It provides a holistic and accurate picture of the commercial finance industry of Hong Kong.  The 2011 study was conducted between August and December 2011 with over 1,000 telephone interviews completed with small and medium enterprise (SME) and Corporate decision makers in Hong Kong.

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,please visit www.nielsen.com