SA consumer confidence declines in second quarter

After two successive quarters of negative sentiment in 2010, online consumer confidence in South Africa jumped 4 points to 88 in the first quarter of 2011. But challenging economic conditions and the rising cost of living expenses failed to sustain this positive sentiment, leading to confidence levels dipping two points to 86 in the second quarter 2011.

Consumer confidence in the U.S. fell to its lowest level on record in the second quarter, while global online confidence declined for the first time in six quarters as economic recovery hit a stumbling block and recessionary jitters again reverberated around the world, according to Nielsen’s quarterly Global Online Consumer Confidence Survey.

“There just wasn’t enough positive news to inspire confidence among global online consumers in the second quarter with South Africa being the most pessimistic country in the Middle East, Africa, Pakistan (MEAP) Region,” said Diane Johnstone, Managing Director, Nielsen Southern Africa.  “The global average is 89 points but regional differences do prevail, with Asia Pacific being the most optimistic region with 98 index points and Europe the most pessimistic with 74 points.

Weak economic figures, slowing manufacturing performance in Asia, the intensifying debt crisis in Europe and political instability in the Middle East combined with rising household expenses and food inflation all took its toll on consumers’ fragile confidence.

Job Prospects Bleak

“South African online consumers are no longer as upbeat about job prospects in Q2.  Negative sentiment towards job prospects jumped 5 percentage points, with 50 percent believing that job prospects are no longer so good in South Africa.  This pessimism was at 47 percent when compared to a year-ago trend,” said Johnstone.

Not only were respondents negative about job prospects but also the state of their personal finances where sentiment declined by two percentage points to 46 percent when compared to the last two quarters where it remained flat at 48 percent.  A phenomenal 83 percent indicated that they have adjusted their spending habits to save on household expenses, an escalation of 18 percent from quarter one.  This sentiment is in line with a year-ago trend (post-recession) when 85 percent indicated they had changed spending habits.

Recessionary Mindset Continues

Hopes for full global recovery in the next twelve months petered out in Q2 as the majority of consumers around the world remained in a recessionary mindset.  “Second quarter data revealed that consumers have retreated back into a recessionary mindset and they are tightening their belts again after the last 12 months of slowly improving, but cautious spending,” said Johnstone.

The recessionary mind set has not been quelled in South Africa with sixty six percent of South African online consumers still believing the country is in a recession against a regional average of 74 percent. In another indication of how consumers are prolonging recessionary sentiments, 58 percent of global online consumers said they are still in a recession – the most in the past year. Of those, more than half (51%) believe they will still be in a recession in a year’s time. The number of Asia Pacific online respondents who said they are currently in a recession rose from 37 percent in Q1’ 2011 to 45 percent in Q2. And in Middle East/Africa, the economic recession lives on for 74 percent of online respondents – an increase of nine points from three months ago.

Plans for Spare Cash

South African consumers’ currently believe that now is not a good time to buy the things they want and need such as luxury items.  Consumers are once again opting to settle debt, put spare cash into savings and 24 percent have indicated that they do not have any spare cash at all, a trend that is continuing from Q4’2010.  The culture of saving spare cash is not unique to South Africa but is a trend pervading globally with 45 percent of consumers indicating savings as a priority.

Respondents have indicated that in order to save on household expenses they will try to save on gas/electricity, spend less on new clothes and take-away meals, cut down on out-of-home entertainment, switch to cheaper grocery brands and cut down on telephone costs.  These items are a top priority to cut costs and save, a trend that goes back to a year-ago as well as Q1’2011.

South African consumers have indicated that these areas of cutting costs are set to continue even when economic conditions do improve.

Increasing Fuel/Food Prices Take its Toll

The major concerns for South Africans in Q2’ 2011 are no different from the previous two quarters:  increasing food and fuel prices, rising cost of utility bills, job security, debt, the economy and crime.    “These concerns are not unique to South Africa.  Rising food prices are taking its toll on consumers worldwide as more and more households are spending a higher proportion of their disposable income to put food on the table,” said Johnstone.

More consumers globally are feeling cash strapped as cost of living expenses and rising food and energy inflation continue to squeeze household budgets. Rising food prices was again consumers’ top global concern, surpassing the economy as the top concern for the second quarter in a row. Thirty-one percent of U.S. consumers said they have no spare cash for discretionary spending, along with 25 percent of Middle East/Africa consumers and 22 percent of Europeans.

What to Watch

“Consumers have weathered the worst of the storm, but the frugal behavior prevalent in 2010 will continue into 2011 as headwinds to growth persist. As disposable income continues to shrink, consumers are constantly re-adjusting their spending patterns to save on household expenses by cutting-back on non-essential/luxury items and activities,” said Johnstone.  Switching to cheaper grocery brands is also an option to save further.  The cutting back on non-essential items and activities and saving on household expenses is a continuing trend worldwide.

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.

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