Consumer Confidence Stabilising

The latest findings from Nielsen’s Global Online Consumer Survey for Quarter 1, 2010 reveal consumer confidence is stabilising with New Zealanders, with our Confidence Index at 98 (refer to Chart 1). Among the 55 markets included in the global survey, New Zealand was the sixteenth most confident, just behind Canada, Hong Kong, and Vietnam.  India (127 index points), Indonesia (116) and Norway (115) remained the world’s most confident nations.  Australia was the fourth most confident at 111 index points. 

Our view of the labour market over the next 12 months, while lower than the Asia Pacific average, was higher than the global average, with 44 percent of Kiwis believing local job prospects were good/excellent (refer to Chart 2). Concerns around job security decreased dramatically with only 15 percent of respondents citing it is a major concern – a decrease of 15 percentage points from a year ago.  These trends resonate with recent labour figures, which show that the unemployment rate has plunged unexpectedly from more than 7 per cent to 6 per cent in the March quarter, with  Bank economists expecting the job market to be on “the cusp of a turnaround”. 

“Consumer confidence has remained flat for Q4’09 and Q1’10 in NZ at around the 100 mark. This is an improvement over the first two quarters in 2009 and represents a general feeling that the worst is over and the near term future will be brighter. This increased optimism is also shared by CPG suppliers, who believe that volume growth will be a little better than 2009 and will in turn drive more profitable growth. From a macro economic viewpoint, GDP growth was +0.8% for the latest quarter, and unemployment is believed to have peaked at 7.3%. The property sector remains a mixed bag, with residential consents up versus a year ago; however the value of non residential consents is down. The proposed new Government tax reforms around property rentals has lead to a general wariness in investing in property. This will likely be overcome in the medium term as Kiwi’s love affair with property re-emerges” said Rob Clark, Managing Director, Consumer Group. 

While overall confidence levels are buoyant, the Nielsen Online Consumer Survey showed that many New Zealand consumers remain vigilant, with 44 percent putting any spare cash into savings and 39 percent of consumers channelling any surplus cash into paying off debts, credit cards and loans. 

However, the number allocating their spare cash to saving dropped back slightly over the past year, and there has been an increase in those willing to treat themselves to holidays, home improvements, out of home entertainment, new clothes and new technology, compared to the same time in 2009 (refer to Chart 3). 

When it comes to consumer concerns, the economy and increasing food prices were the biggest with 24 percent of Kiwi respondents citing it as major concerns over the next six months – the economy down from 35 percent 12 months ago, while increasing food prices rose four percent from 12 months ago. Work/life balance came in close second place with 23 percent of respondents, followed by increasing utility bills at 22 percent. Three in five consumers (63%) said they had already taken action to try and save on gas and electricity over the past year, and even when economic conditions improve, saving on gas and electricity came was the number one action cited to reduce household spending. 

“From a consumer purchasing perspective, most refer to this as a recovery with a small ‘r’. High prices over the past 18 months have seen some impressive value growth (7%) in the supermarket channel; however the underlying unit sales growth has been weak (1%). As prices start to stabilize and in some cases fall, we are seeing some stronger unit sales growth emerge. There is no doubt that the supermarket channel has been the winner over the past 12 months in terms of CPG sales, with other sectors such as the convenience channel and specialist food retailers suffering. The trend toward households cooking more meals at home, entertaining at home and going to pubs/clubs less often is also true in NZ. The Government is looking to increase GST (goods & services tax) by 2.5%. Almost 50% of consumers claim they will spend less on groceries as a result, putting further pressure on volume growth,” added Clark.