Malaysian Consumer Confidence Rebounds in Q2 2011

Online Consumer Confidence in Malaysia rebounded 5 points to an index of 110 in the second quarter of 2011, its highest level since the third quarter of 2006, according to the latest Consumer Confidence Index (CCI) reported by Nielsen via its Global Online Survey.

Despite the 9 percentage points drop in consumer confidence across the Asia Pacific region, Malaysia ranked 4th (along with United Arab Emirates) among the 56 countries surveyed. Malaysia was at the twelfth position a quarter ago. Remaining at the top of the list is India (126), followed by the Philippines (115) and Indonesia (112).

Favourable labour market conditions have prompted online consumers in Malaysia to be more confident towards their job prospects in the second quarter of 2011 as compared to the last quarter.

 77% of online respondents described their job prospects as excellent or good over the next 12 months (up 5% points quarter-on-quarter). As a result, Malaysia advanced to 2nd place (4th place in Q1 2011) among the top ten most optimistic countries (job prospects). In contrast, consumers’ optimism with regards to job prospects dropped 9 percentage points to 57% (average) across Asia Pacific region from a quarter ago.

Malaysia also clinched the 6th position among 56 countries in terms of consumers’ optimism towards their personal finances in the coming 12 months. Two-thirds of consumers surveyed online rated their state of personal finances as excellent or good as compared to 60% in the first quarter.

“The confidence levels remain positive in line with the country’s economic progress, supported by increases in both government spending and private sector investments under the Economic Transformation Programme, as well as the private consumption. We also saw a robust 9.3% increase in consumer spending year-on-year on retail FMCG categories tracked by Nielsen in the second quarter, which is very encouraging,” said Kow Kuan Hua, Managing Director Nielsen Malaysia. “We see the Food and Beverages Categories growing at a healthy rate. In particular, the Dry Groceries and Dairy segments registered strong double-digit value growth (up 10.4% and 15.9% y-o-y respectively), while Health and Wellness (up 13.3% y-o-y) was the star department in the Non-Food Categories in the second quarter of 2011, followed by an increase of 9. 3% year-on-year growth in the Personal Care segment.”

Although consumers are upbeat about the domestic demand in the country, they are also concerned about the slower external trade and global economic growth amid several global political and economic uncertainties. Economy remains the biggest concern among 18% of online respondents (up 4% quarter-on-quarter).

“The price hikes in subsidised items such as sugar, diesel, petrol and electricity tariff remain at the heart of the issue for Malaysians. The price of RON97, adjusted twice in the second quarter, combined with the removal of price subsidies on diesel fuel for several commercial vehicles, raise the costs for both consumers and businesses,” said Kow. “Not surprisingly, more consumers are feeling or expecting the impact of rising fuel prices to hit home harder. This percentage almost doubled from 9% in the first quarter to 16% in the second quarter, surpassing consumers’ concern about increasing food prices.”

 At the Asia Pacific level, rising food prices (19%) remained the biggest concern for all.

With the Consumer Price Index rising 3.3% in May year-on-year (the fastest pace of growth in two years), consumers will remain cautious when it comes to spending their disposable incomes. Nielsen’s study found that only 36% of the respondents agreed that the next 12 months would be a good time to buy things they want and need as compared to a quarter ago. In addition, 84% of consumers surveyed online said they have changed their spending patterns to save on household expenses (79% in Q1 2011).

Spending less on purchasing new clothes (63%) remained their top strategy to manage discretionary spending in the second quarter of 2011. This is followed by cutting down on out-of-home entertainment (61%) and saving on gas and electricity (59%). More respondents have switched to cheaper grocery brands (54% as compared to 50% in Q1) to manage their household budgets in the second quarter.

After paying off their essential living expenses, Malaysian consumers are expected to use their spare cash in much the same ways. 6 out of 10 (62%) consumers surveyed online in Malaysia will still put their spare cash into savings. This has positioned Malaysia in 5th place among 56 countries surveyed when it comes to intention to save. While others may pay more attention to adjusting and stretching their budget, Malaysia (42% of online respondents) topped the list among all countries surveyed for having the highest percentage of respondents wanting to pay off debts/credit cards/loans with their spare cash. Holidays (35%) and investing in shares/mutual funds (32%) came third and fourth respectively.

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