While 53% of those surveyed by Nielsen think their country has hit a prolonged recession that will last more than 12 months, 18% of consumers, concentrated in a handful of emerging markets, like India, Vietnam, China, and Russia, told Nielsen they expect their countries to be out of recession within the next 12 months.

In contrast, consumers in Japan, Germany, Argentina, Mexico, Turkey, Italy, Taiwan, the U.S., and Spain were the least optimistic about the prospects for quick economic recovery.

Nielsen surveyed 28,663 Internet users in 52 markets across Europe, Asia Pacific, the Americas, and the Middle East between September 22 and October 6, 2008, as part of its Global Online Consumer Survey.

The survey’s results reveal that global consumer confidence fell to a new low this month, dropping from an index of 88 in May 2008 – previously the lowest index on record – to 84 in October, according to Nielsen.  Only Brazil, the Philippines, New Zealand, China, Thailand, South Africa, and Hungary showed improved consumer confidence, compared with May 2008.

Not surprisingly, consumers worldwide are adopting new strategies to reduce discretionary spending and shore up household finances.
 
On average, 49% of global consumers plan to spend less on new clothing, as well as gas and electricity, according to Nielsen. 

Meanwhile, 47% report reducing out-of-home entertainment, 40% say they’ll delay upgrading to new PCs and mobile phones, and 39% will cut down on take-away meals from restaurants. 

Even necessities, like groceries, are on the chopping block — 36% of global consumers report switching to cheaper grocery brands in order to reduce their expenses.

Overall, consumers in Australia, New Zealand, Germany, the U.K., Turkey, the U.S., Colombia, and Argentina plan to make the most changes in their spending habits, as they search for ways to weather the current economic turmoil.

View the full press release.

Read a related press release on consumer confidence in Hong Kong and Great Britain.

Read coverage of Nielsen’s findings by Sky News and in the Shanghai Daily, the Business Standard (India), Forbes, the Financial Times, The China Post, the Thanh Nien Daily, and the Malaysia Star.

Learn more about global consumer confidence levels in the December 2008 issue of Nielsen’s “Consumer Insight” online newsletter.

NielsenWire recently spoke with the co-author of Nielsen’s holiday retail forecast, James Russo, Vice President of Food Sector Marketing, Nielsen.

NielsenWire: What is the forecast for 2008 holiday shopping season*?

James Russo:
All consumer, economic, and trade indications point to a flat-to-declining holiday selling season across the core consumer packaged goods (CPG) categories that Nielsen tracks. While we forecast, in dollar sales, a gain of 4.7% vs. a year ago, we also predict a decline of -0.8% in unit sales. This is directly tied to the current volatile economic environment, during which close to 33% of households across all income levels are projected to spend less this holiday season, according to a Nielsen Consumer Household survey conducted during the third quarter of 2008.  But despite this tough economic climate and slowing sales, there are opportunities for growth. Segmentation of consumers, channels, and categories will be critical to uncovering those opportunities.

NielsenWire: What might take marketers and retailers by surprise this season?

James Russo:
In the past nine months, consumers have found ways to cope with the current economic situation, as indicated by the following trends:

-”Trading Down,” whether from higher-end retailers and brands to value-retailers and brands, or from vacations to “staycations,” is the new norm.

-Consumer decisions are failing into either “necessary” or “discretionary” spending.

-At-home entertainment is resurgent.

-Consumers are seeking and responding to value solutions, as evidenced by the reemergence of coupon activity as an effective promotional tool.

Surprisingly, consumers are continuing to purchase Health and Wellness items, as evidenced by double-digit gains across products with antioxidant, organic, or whole grain claims.  Note, however, that consumers are increasingly purchasing these products from value oriented grocery stores, supercenters, and club stores.

Look also for a strong year from online sites (especially on Cyber Monday), superstores, and club and dollar stores.  Consumers are increasingly shopping at these retailers as they stock up and pursue value.

And although it is shrinking, there is still a consumer market for “affordable luxuries” and premium based consumption.  In this climate, “trading up” behavior will be less extensive, however consumers, especially during the holiday season, may opt to buy nicer bottles of wine, serve premium candy, or even purchase that new mobile phone. The challenge is to understand consumers’ motivations and shopping patterns at an increasingly local level. 

NielsenWire: What trends should consumers be on the look-out for this season?

James Russo:
CPG manufactures and retailers recognize the strategies that resonate with consumers – but, execution will be the challenge. We anticipate heavy promotional activity to drive traffic in a slowing economy, however, look for organizations to also tap into the increasing consumer desire for “at home” experiences.  This, more traditional holiday message will be delivered through advertising and marketing messages where retailers and manufacturers will push their value solution for consumers. It’s an opportunity for manufacturers and retailers to engage with shoppers, communicate their understanding of current financial pressures, and deliver their value propositions — all while securing brand and/or retailer loyalty. With over 2.5 billion customers ready to shop this season, according to Nielsen In-Store, manufacturers and retailers need to prepare for the challenges that accompany increasingly savvy consumers.

NielsenWire: How did you assemble this year’s forecast – what data did you look at and how did you analyze it to arrive at your final conclusions/predictions?

James Russo:
The Nielsen Consumer Industry forecast is different from any other industry forecast, as it is perhaps the most comprehensive. Our Business Consulting Group conducted an extensive analysis of 125 core CPG categories, in order to understand their current and historical trends during previous holiday seasons.  Then, they analyzed existing trends, along with current and expected economic conditions, to arrive at a macro-level result that delivers foresights to support our clients’ holiday and 2009 planning efforts.

NielsenWire: How accurate is this year’s holiday sales forecast?

James Russo:
It’s too early to gauge our forecast, but we are firm in our commitment to the findings and will be delivering mid-holiday period updates of our forecast, as well as insights in what consumers really think about holiday advertising.  Nielsen IAG, which measures consumer engagement with television programs, national commercials, and product placements, will also deliver an exclusive real-time summary of the most effective holiday commercials, with a focus on CPG categories and retailers.  Stay tuned on NielsenWire for these forecast updates.

NielsenWire: Looking beyond the key holiday selling season, what insights can you share that will assist marketers as they plan for 2009?

James Russo:
Millions of consumers are set to enter stores and shop online this season – they do so while grappling with historic levels of household financial pressures. The tactics and strategies CPG companies develop now, to weather the holiday retail season, will not only provide benefits in the short term, but also during the long term, as consumer behavior in the U.S. undergoes fundamental changes. It is our recommendation to utilize the economic slowdown as a time to build competitive advantage and secure your position going forward.  A few key points to keep in mind:

-Value is clearly the main motivator for consumer purchase decisions — whether it’s channel selection, product choice, functionality, or price. 

-Necessary vs. Discretionary spending will drive consumer decision-making.  Food, personal care and household basics – not nice-to-haves – will drive strong sales.

-Expect widespread “Trading Down”: consumers will move from higher-end retailers and brands to value-retailers and brands; from fresh segments to canned & frozen varieties.

-As manufacturers and retailers look to control shipping costs, a local sourcing trend will continue.

-Look for increased levels of at home consumption — whether in food or entertainment.  Products and Services that deliver on this messaging will succeed.

-New Usage patterns are emerging: skipping meals, washing clothes less often, watering down cleaning solutions, skipping medications or taking half doses.

These are unprecedented economic times, with unique challenges and opportunities.  Now, perhaps more than ever, the ability to understand your consumers and specifically what is driving their behavior will ensure success during the coming holiday season and beyond. The steps you take now will not only assure success in the short term but, more importantly, position your organization for long term growth.

Read Nielsen’s holiday retail sales forecast.

*Nielsen’s Holiday Sales Forecast includes sales during the eight weeks in November and December in food stores, drug stores, mass merchandisers, and convenience stores. 

Submit questions about the report to Nielsen forecast co-authors, James Russo and Todd Hale, by commenting below.

That trend may now be changing, according to Nielsen, which recently released data showing a slowdown in organic dollar sales and unit sales growth in the four weeks ending Sept. 6.

Dollar sales of organics grew by just 13%, while unit sales grew by 8% in the four weeks between August 9 and Sept. 6, according to Nielsen.  In contrast, dollar sales of organic products grew by 23% and 33% in for the same periods in 2006 and 2005, respectively.

Still, during the 52 weeks ending August 9, organic dollar sales totaled $4.7 billion — a 23% increase in dollar sales and a 20% increase in unit sales over the previous 52-week period.

Read the full report, “Is the Organic Sales Explosion Over?”

Consumers in the Asia-Pacific region, for example, are more inclined to save than to splurge if they have spare money, while Russian consumers pump their extra cash into expanding their wardrobe, according to Nielsen.

Meanwhile, people in Nordic countries continue to spend money on travel and vacations, while Brazilians are happy to stay home.

Discretionary income has also become increasingly scarce in countries throughout Europe and North America, according to Nielsen.  One-fifth of those surveyed by Nielsen in Britain, Germany, and France — and a quarter of Americans — have eliminated spending money for pleasure, The Economist noted.

Still, some small luxuries have remained immune to the economic gloom: 80% of Americans are continuing to shell out $10-$12 per ticket to catch movies on the big screen, Nielsen found.

In addition, nearly two-thirds (63%) of consumers are compensating for rising gas prices by reducing their spending, Nielsen found. That percentage increased by 18 points since June 2007 — and by 14 points in the last six months alone.

“While discretionary spending is likely to be a challenge for most low and middle income shoppers, even affluent consumers are looking for ways to make their dollars go further,” Todd Hale, senior vice president, Consumer & Shopper Insights, Nielsen, noted.

Nielsen’s survey was conducted during the first week of June 2008, when regular gas averaged $3.98.

View the full press release.

Read the Associated Press story.