Consumer confidence in Hong Kong fell 15 points in the third quarter, dampened by concern over the regional and global economy plus recessionary fears, and pushing down spending intentions by a full 20 percentage points.

 

According to research company Nielsen, consumer confidence in Q3 dropped 15 points last quarter from 104 to 89 points and, while this is expected to be a temporary dip, it demonstrates the sensitivity of residents to external conditions. In Q3, 60% of Hong Kongers said they felt in recession, up 19 percentage points from the previous quarter.

 

Oliver Rust (below), Managing Director of Nielsen Hong Kong says: “Europe’s debt crisis, fluctuating recovery data from the US, and the speculation of China’s GDP growth last quarter resulted in increased concern about Hong Kong’s own economy, with more consumers believing we were in recession. This has impacted consumers’ increasingly negative outlook for job prospects, personal finances and spending intentions.”

 

The survey revealed that only 35% of Hong Kongers were optimistic about job prospects for the next 12 months, down from 50% in the Q2; outlook on personal finances fell from 61% in Q2 to 43% in Q3 which in turn affected consumers’ immediate spending intentions, which declined from 51% to 31%.

 

Spending on out-of-home entertainment dropped nine points to 33% in Q3, with demand for new clothes and new technology products also falling five and four percentage points respectively.  “During periods of uncertainty, cautious Hong Kongers always rein in discretionary spending and what we have seen in the last quarter is no different,” adds Rust.

 

MAINLAND CHINESE REMAIN A TARGET

Advertising spend, another barometer of economic and consumer confidence, also dropped two percentage points to 11%, continuing a negative trend every quarter this year after a rebound in 2011.  However Rust notes that “there was strong growth in ad categories specifically targeting mainland tourists” who remain a growing source of revenue for Hong Kong retailers.

 

Ad spending in cosmetics and skincare, a top mainland category increased +16% year-on-year according to AdmanGo. Meanwhile the latest HK2A Nielsen Adspend report says that 56% of Hong Kong businesses believe mainland Chinese tourists are their top business opportunity this year, in front of government economic stimulation policies (48%).

 

“While the number of mainland visitors has increased +23% compared to the same period last year, we have noticed per capita spend is slowing down as an increasing number of visitors use Hong Kong as a stopover towards their final destination,” claims Rust.

 

Overall Nielsen says that total retail sales slowed to +6% growth in Q3 compared to +11% a year ago, with fast-moving consumer goods sales slowing to +12% growth from +15% in Q2 as “consumers continue to be more frugal in their spending as they look to economise”. On the positive side Rust believes that Q4, will see a rise in retail spending as confidence improves in the Chinese economy, and due to the effect of Christmas.