The Chinese Consumer Confidence index, at 106 in the third quarter of this year, remained almost unchanged from the second quarter and at the same level as one year ago, according to the latest Nielsen Consumer Confidence Index survey.
“China’s economy is generally in good shape and on track for stable economic growth and restructuring. The stabilizing consumer confidence index further proved that Chinese consumers are adjusting to the new economic trend,” said Yan Xuan, president of Nielsen Greater China.
Worldwide, global consumer confidence increased one point from the second quarter to a score of 99. Apart from China, four of the world’s top 10 economies posted optimistic scores of 100 or higher: U.S. (106), U.K. (106), Germany (100) and India (133).
According to the third-quarter Global Consumer Confidence report, six in 10 Chinese respondents were confident about their personal finances (60%) and job prospects (58%) in the coming year, and just under half (49%) believed now is a good time to spend.
“While facing continued downward pressure and global market uncertainties, China may experience some short-term pains during its economic transformation, but the country has huge potential, sufficient advantages and plenty of space for maneuvering. The country’s new economy is vibrant, new businesses are booming, and new growth momentum is accumulating. Consumption contributed over 70% to overall GDP growth in the first six months of the year,” said Yan Xuan. “We believe China is capable of keeping its economy on track for sustainable growth, and consumption will continue to be an important driver for the country’s economic growth.”
The Nielsen Consumer Confidence Index measures perceptions of local job prospects, personal finances and immediate-spending intentions. Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism, respectively.
Confidence in WEST CHINA CONTINUES TO PICK UP WHILE EAST RECOVERS TO THE HIGHEST LEVEL IN TWO YEARS
The Consumer Confidence Index in East China has been going up since the first quarter of this year, from 117 to 120 in the third quarter. Meanwhile, the same trend appeared in the index of West China, climbing from 95 to 98 over the same period.
According to the report, the index increased in the west because of policy support from the government. The mounting investments in infrastructure in this region, together with the emerging opportunities in local economy, bringing new momentum to local’s economic growth. And this further drove the rebound in job and income prospects. The huge increase in willingness to spend was the most conspicuous change, growing from 35 in the second quarter to 40 in the thrid quarter. At the same time, the willingness to spend in the east climbed from 65 in the second quarter to 67 in the thrid quarter.
The report also shows that consumers in the west and in the east differed in the reason why they believed that now is a good time to spend. In the west, consumers focused more on their increasing income, while consumers in the east thought what drove them to spend money was the inexpensive cost, increased product diversity and the convenience of purchasing.
Meanwhile, basic family consumptions were the key in the west region, with 55% in commodity and 50% in utility pay. By contrast, there were more quality-of-life consumptions in the east, like dining out (51%), buying apparel and clothes (51%), and tourism (40%).
SECOND AND THIRD TIER CITIES SEE ROBUST GROWTH IN CONFIDENCE
According to the thrid-quarter report, the Consumer Confidence Index started to diverse among different tiers of cities in China. Tier 1, 2 and 3 cities witnessed a rise in consumer confidence, especially in tier 2 cities (from 105 in Q2 to 110 in Q3). In tier 4 cities, Consumer Confidence Index was stable season on season, at 107.
In the first half of year, the increase of GDP and investment in most tier 2 cities was rapid, higher than the country’s average. The consumer confidence in tier 2 and tier 3 cities rose mainly due to the recovery of employment in the local areas, which promised consumers a better income prospect.
The report also found that the consumption of digital appliances, skin care and cosmetics, and apparel and clothes augmented greatly in tier 2 and 3 cities.
FMCG GROWTH SHOWS SIGNS OF STABILIZING
As China’s overall economy is on the track for stable growth and entered the development of a new normal, sales value growth showed a continued deceleration in growth for most categories of fast-moving consumer goods (FMCG). In terms of total value, China’s FMCG market growth has moderated in recent years, dropping from high double digit growth of 14% in 2014 to single digit of 6% this year.
One of the key reasons for FMCG growth deceleration was that the pace of premiumization slowed down over the past year. These high-end products contributed 5% sales growth two years ago, but declined to 1% this year.
The survey also found that more and more families are going online to buy their FMCG products, and this is having a significant impact on the retail landscape in China, with online sales contributing 5% of the FMCG sector’s value growth, one percentage higher than last year.
Therefore, innovation is increasingly vital for the success of a newly launched FMCG product and is also an important driver for a brand’s going premiumization. For instance, although the price of gum care toothpaste is 1.5 times of the category’s average, its growth in sales value in the first half of 2016 is 13% higher compared to the category average.
“It’s important to pursue FMCG growth opportunities in China’s booming e-commerce market, which provide an efficient way to reach and recruit shoppers across China,” said Yan Xuan. “In addition to tapping opportunities brought by e-commerce, winning brands are those that quickly understand the changing dimensions and adapt to the new normal. Understanding China’s changing trend can help FMCG companies adjust marketing strategy to find the best ways to succeed amid the slowing economic growth.”