Survey shows consumer confidence down at end-2016

THE Malaysian consumer confidence ended 2016 on a gloomy note as the index dipped five points from third quarter to 84 percentage points (pp) in the fourth quarter of last year, according to the latest Nielsen Global Survey of Consumer Confidence and Spending.

In the latest online survey, confidence levels in South-East Asia continue to remain high with four out of six countries in the region scoring above the 100 pp mark, Singapore and Malaysia being the exception.

The Philippines (132 pp, unchanged from last quarter), Indonesia (120 pp, -2), Vietnam (112, +5) and Thailand (110 pp, +2) retain their titles as the top 10 most confident countries globally while Singapore scored 86 pp (-8 from previous quarter).

Globally, Malaysia ranked 37th most confident country in the fourth quarter of 2016, down seven spots from last quarter. The average global consumer confidence is 101 pp (+2 pp versus last quarter).

“Malaysia now has one of the lowest consumer confidence ratings in South-East Asia, which does not bode well for local demand in the country for 2017.

“With such low confidence level, we cannot expect consumer spending levels to move positively for the next six months. As such, I believe that consumer spending will remain flat at best,” said Nielsen Malaysia country manager Richard Hall.

The Nielsen Global Survey of Consumer Confidence and Spending Intentions measures consumer confidence, perceptions of local job prospects, major concerns and spending intentions among more than 30,000 respondents with Internet access in 63 countries.

Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism.

Within a country, period-to-period movements of seven points or more are considered statistically significant.

The economy (55%), increasing food prices (25%) and political stability (21%) has been listed as Malaysian consumers’ top key concerns in the fourth quarter of 2016.

More than four fifth of the respondents (85%) also believe that the nation is in a recessionary state (+8% from last quarter) and at least one in two Malaysians perceive that their state of personal finances to be either not so good or bad in the next 12 months (52%, +5% from previous quarter).

At least two thirds of Malaysian respondents are also feeling less optimistic about local job prospects over the next 12 months being not so good or bad (63% versus 59% per last quarter).

“Concern about the economy increased in the fourth quarter (with 85% of Malaysian respondents believing the country is in recession) despite all economic indicators being positive.

Consumers are also increasingly worried about rising food, utility and fuel costs, which, together, are the second-biggest concern after the economy overall.

“The continuing depreciation of the ringgit could also be top of mind for most consumers as the prolonged situation means that suppliers will potentially have no choice but to pass on higher import costs to consumers in the long run. In addition, as Malaysia enters a potential election year in 2017, concerns about political stability have increased, consistent with the trend we saw before the last election,” Hall noted.

While consumers in South-East Asia remain to dominate the world’s top 10 when it comes to channeling any spare cash into savings after covering essential living expenses, only 59% of Malaysians would do so compared to 65% in previous quarter (10th place globally on depositing extra spare cash into savings).

Consumers in Vietnam retains its first spot (76%) followed by Indonesia in third (71%), Singapore in fifth (65%), the Philippines in sixth (64%) and Thailand in eighth (63%). The global average of consumers putting spare cash into savings is 50% (-2% from last quarter).

As Malaysian consumers focus on building their savings, they are also tightening their belt when it comes to big-ticket indulgent. Only about a third of Malaysians would go on vacations/holidays (30% versus 45% last quarter).

The survey also revealed an overall cautious spending among Malaysian consumers in the fourth quarter of 2016, with decline in spending on new clothes (21%, -15% from previous quarter), new technology products (13%, -7%), home improvements/ decorating (13%, -5%) and out-ofhome entertainment (16%, -3%).

Although two in five respondents continue to pay off debts, credit cards and loans with any spare cash (41%, +1% from previous quarter), there has also been a slide among respondents putting in any spare cash into retirement funds (19%, -7%) and investing in shares of stock or mutual funds (28%, -6%).

Interestingly, at least one in 10 Malaysians say they do not have any spare cash after covering essential living expenses (11%).

“Limited spare cash seems to be a key factor for Malaysian consumers and with their increased concerns on rising prices, they obviously feel that they have less money to save or spend on non-essential items,” he added.

In view of the increasing general cost of living in the country, Malaysian consumers continue to be prudent about their spending habits. Nine in 10 respondents said they have changed their spending habits to improve household savings in the past 12 months (88%, +2% from last quarter).

Over half of Malaysians continue to spend less on new clothes (58%) and out-of-home entertainment (55%) while at least one in two Malaysian consumers have switched to cheaper grocery brands (51%) in the past year to save on household expenses.

However, should economic conditions do improve, at least one quarter of Malaysian consumers say they will continue to cut down on out-of-home entertainment (29%), spend less on new clothes (28%) and switch to cheaper grocery brands (27%), the survey revealed. – By Daljit Dhesi