After two successive quarters of negative sentiment in 2010, online consumer confidence in South Africa jumped 4 points to 88 in Q1'2011.
Global online consumer confidence rose two points in the first quarter of this year to an index of 92 driven by record confidence gains in the Middle East/Africa following social and political unrest in the region and strong-performing Asia Pacific economies, according to an online study released by The Nielsen Company (NYSE:NLSN). Asia Pacific's consumer confidence index skyrocketed 10 points from last quarter to reach 107 - the highest score on record and Middle East/Africa surged 17 points to a new high of 106. At 109 index points, the United Arab Emirates (UAE) reached the highest level in two years and Egypt recorded the highest score ever at 102 index points.
North America rose two index points to a consumer confidence score of 85 driven by increases in both the United States and Canada. In the USA an improving labor market drove a two point rise in consumer confidence, but the resulting score of 83 is still precariously close to the recession low of 80 recorded in 2009. Canada posted a 3 point increase in consumer confidence levels at 102 index points. Consumer confidence levels in Europe continued to decline in 18 out of 28 countries measured for a regional consumer confidence drop of five points from last quarter to a score of 73.
In the last 18 months, we have seen a clear divergence in how regions and countries are emerging from the global recession and this trend has become even more pronounced in the first quarter for better or worse. Seven out of the top ten optimistic countries hailed from Asia Pacific, while European markets dominated nine out of the top ten most pessimistic nations. India remained the most optimistic country in the first quarter (131 index points) followed by Saudi Arabia (118) and Indonesia (116).
"Global recovery, despite its slow pace, is heading in the right direction but this has not quelled the recessionary mindset in South Africa. Sixty seven percent of South African online consumers say that the country is currently in a recession, which is two percent up from Q4'2010," said Diane Johnstone, Managing Director, Nielsen Southern Africa. "The global average is 55 percent but regional differences do prevail, with 37 percent of Asia Pacific consumers saying they are in a recession today compared with 68 percent of Europeans and 82 percent of North Americans (the most pessimistic region)."
"It is encouraging to note that South African online consumers are slightly more upbeat about job prospects despite their belief that the country is still in a recession," said Johnstone. Up by three percentage points from Q4'2010, 33 percent of respondents think that job prospects will be good over the next 12 months. Although still high at 45 percent, negative sentiment towards job prospects has declined by four percentage points from 49 percent in the previous quarter. Globally 40 percent of consumers are positive that job prospects will be good over the next twelve months.
Plans for Spare Cash
The recessionary mindset does not augur well for the economy as consumers opt to continue spending cautiously and tighten their belts further. The number of South African consumers, who are positive that their state of finances will be good, remains flat at 48 percent since Q4'2010, against a global average of the same number. "Although consumers are generally upbeat about their personal finances, 54 percent still believe now is not the time to buy the things they want and need. Consumers are instead opting to pay off debt and save spare cash, a trend that is continuing from Q4'2010," said Diane Johnstone. The culture of saving spare cash is not unique to South Africa but is a trend pervading globally with 47 percent of consumers indicating savings as a priority.
Increasing Fuel/Food Prices Take its Toll
Replacing crime and debt as the major concerns among South African online consumers, the rising food and fuel prices is now what worries consumers most. "These concerns are not unique to South Africa. Rising fuel and food prices are taking its toll on consumers worldwide as more and more households are spending a higher proportion of their disposable income on these costly necessities," said Johnstone.
In Q1'2010, only 2 percent of South African online consumers were concerned with increasing fuel prices. This number has spiraled by thirteen percentage points to 15 percent in Q1'2011 as a result of the many fuel price hikes and has now become the biggest concern for online consumers. Food prices also increased significantly as a cause for concern, escalating seven percentage points to 14 percent and rising utility bills remained a top priority among 13 percent of respondents.
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. Seventy percent have indicated they will cut down on take-away meals, an increase of four percentage points from Q4'2010. Sixty eight percent will continue to try and save on utilities whilst 66 percent have indicated they will cut down on out-of-home entertainment and spend less on new clothes. Switching to cheaper grocery brands is an option for 65 percent of respondents. The cutting back on non-essential items and activities and saving on household expenses is a trend worldwide.
This trend is not a short-term measure as 60 percent of South African consumers have indicated that they will continue to save on gas and electricity when economic conditions do improve. Consumers have further indicated they will continue to cut-back on take-away meals, save on telephone costs, spend less on new clothes and switch to cheaper grocery brands, which have become a way of life since 2010 in South Africa.
About the Nielsen Global Consumer Confidence Survey
The Nielsen Global Online Survey was conducted between March 23 and April 12, 2011 and polled more than 28,000 consumers in 51 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.
About The Nielsen Company
The Nielsen Company (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 assets. The company has a presence in approximately 100 countries, with headquarters in New York, USA. For more information on The Nielsen Company, visit www.nielsen.com