With hopes for a full economic recovery accelerating in 26 out of the 28 major global markets surveyed as part of the Nielsen Global Consumer Confidence Index in late June, consumers around the world might be expected to return to their previous spending patterns.  But according to a new report from Nielsen, some consumers may find it hard to shake recessionary habits.  The severity of the recession has brought about a change in consumer values, spending habits and lifestyle choices in some parts of the world, and the indication is some consumers in the West will continue to refrain from excessive or unnecessary spending across all aspects, at least in the short term.

Highlights from the report include:

• Nearly one-third (29%) of consumers will continue to economize on gas and electricity, with 48 percent of Americans saying that they will continue to save on utility bills.
• One in six global consumers will continue to cut back on take-away meals, with 22 percent of Australians indicating that’s one area they will continue to reduce spending. Significant numbers of New Zealanders, Japanese, Irish, South Africans, Brazilians and Americans also indicated they would stay away from take-away.
• One in six global consumers say that they will continue purchasing cheaper grocery products, spend less on new clothes and cut down on out-of-home entertainment.

The findings were not all cautious, however.  Consumers in the BRIC markets (Brazil, Russia, India and China) are generally looking forward to putting recent recessionary behaviors behind them and returning to their previous spending patterns.  Buoyed by rising stock markets and continued (if slower) economic growth, these consumers offer marketers, retailers and others some hope in the short term.

Findings included:

• Chinese remain the most confident of an economic rebound in the near future, and sales of consumer goods products remained robust last year – up 21 percent.
• One in six Russians said that they would not retain any of their recessionary habits once the economy improves, and are particularly eager to spend their money on clothing.
• Technology such as home computers and mobile phones look to be early winners: consumers in Japan, Korea and the Philippines are looking forward to upgrading their current gear.
• More than 40 percent of Americans say they expect to increase their spending on travel and holidays, dining out and out-of-home entertainment in the coming months.

As economic recovery gather pace, consumption and spending will increase, but the post-recession consumer is likely to consume very differently.  She will think twice – and maybe thrice – about making purchases big or small.  It’s now fashionable in the West to be frugal and trendy to be thrifty.  But marketers that are able to convey the value of their products and services will likely continue to grow and prosper.

Download the full report: Consumers in a Post-Recession World

“While most overseas advertising markets were already in meltdown by mid 2008, the impact was not clearly evident in Australia until later in the year. When consumer and business confidence was declining in late November and exports /commodities trading were drying up, rapidly softening economic conditions led to more cutbacks in jobs, and for many organisations, forensic cutbacks in advertising activity,” said Peter Cornelius, Managing Director Media for The Nielsen Company Pacific.

Not surprisingly, main media ad spend activity reflected this spiralling demand trend, with the financial year finishing an estimated 6.2% behind the corresponding period in 07/08.  However, the 08/09 financial year was really a tale of two halves. The first half (July – Dec ‘08) was down only 2.3% on the same period in 2007. The second half of the financial year (Jan -Jun ‘09) took the full brunt of the economic downturn with a decrease of almost 11% versus the same period in 2008. It is this ‘low’ base the industry will be watching very closely as media trading improves in line with the much anticipated future economic recovery.

Ad Spending in Australia’s main media, FY 08/09 vs. FY 07/08

Major Advertising Categories Overview

The top 10 Major advertising categories account for 71 cents in every main media ad dollar invested and provide vital indicators on the health of the advertising and media markets.

This is particularly significant when reviewing retail, Australia’s largest category which accounted for more than 21percent share of media spending. The Government’s stimulus packages in early 2009 helped renew confidence among retailer advertisers who promoted heavily to encourage consumer sales. Remarkably, in this economic downturn, retail advertising recorded a minimal 1.1 percent decline YOY to $2 billion.

Australia’s Top Advertiser Groups / Advertisers Overview

The Top 25 advertisers accounted for 21 cents of every main media advertising dollar invested in the financial year. The sectors which were most representative of this elite group of advertisers were Retailers (5), FMCG (4), Motor Vehicles (4), Governments (4) and Telecommunications (2).

The country’s dominant media advertiser group was Wesfarmers Limited, incorporating some of Australia’s foremost retail chains including Coles Supermarkets, Target, Kmart, Bunning’s Hardware, Officeworks and Liquorland. The group finished the financial year with an estimated $220 million spend, just 2.1percent behind 07/08.

Harvey Holdings was the 2nd ranked top Advertiser and performed strongly in what was considered a difficult year for Retailing and advertising generally. With a 4.6 percent increase to an estimated $135 million spend, the group lifted 2 spots from 4th position last year. Also stepping up two positions was 3rd ranked Woolworths Limited, substantially increasing their main media advertising presence by 8.7 percent to $134 million.

Will there be an early Australian advertising recovery?

At the time of writing in September 2009, the financial analysts’ debate continues as to whether Australia ever was officially in recession, although strong retail figures suggest that this may have saved the economy from tipping into one. However, Australia’s economy appears to have begun to rebound with greater speed and resilience than most overseas markets. There remains a cautious attitude among media and marketing sectors about a significant recovery before the end of 2009.  However, as our fiscal year ad spend estimates reflect, and taking into account a soft first six months of 2009, advertising activity may need time to recover and rise into the black.

Certainly, our studies support the theory that those who advertised through the tough times have maintained their competitive advantage as the economic climate improves. Marketing dollars spent during a downturn have less competition for eyeballs, so those who cutback may face even bigger challenges winning back consumers’ hearts and minds.

In the U.S., consumers remain skittish.  Shifts to private label brands continued at a strong pace, as they have for the last eight months, while consumers are shopping less frequently and spending less per trip.  Canadians, on the other hand, are spending more per trip, and are taking advantage of retail promotions.  Unlike in the U.S., private label brands are struggling to gain share as national brands step up promotional activity.

In Europe, the French remain relatively unchanged in their shopping.  Value channels continued to see growth and more retailers were selling on promotion, leading to a modest increase in the amount spent per trip.  Germans showed very little change in the number of shopping trips they took, nor did they increase or decrease how much they spent.  Unit sales increased, however.  In the UK, sales volume improved slightly from the previous month, while budget store brands’ growth slowed as consumers began returning to premium brands.  British shoppers were also spending slightly more per trip.  Italians continued to move to store brands and value channels, although they were reducing their shopping frequency.  Spaniards, who have been among the most optimistic, have not seen that reflected in spending.

Brazilians showed an 8 point surge in optimism, and this translated into more frequent shopping trips and higher sales, in both volume and value terms.  Hong Kong and China both showed growth in sales, but Taiwan showed declines, and optimism there was among the lowest in Asia.  Indian consumers’ confidence was high, and volume and value sales both increased by more than 5 percent.

“While things are starting to look up, it’s clear that Americans and Western Europeans aren’t quite convinced that recovery has taken hold and remain cautious when it comes to shopping.  The labor market is clearly affecting this behavior.  It comes as little surprise that Brazil, India and China – countries that have generally been less affected by the global recession – are among the first to see renewed consumer confidence and sales growth,” said James Russo, Vice President, Global Consumer Insights at The Nielsen Company.

The Buzz

While the idea of recovery hasn’t opened up global consumers’ wallets quite yet, it has started to infiltrate their discussions on the Web.  In June, 71 percent of survey respondents thought that their countries were in recession, an improvement from the 77 percent who thought the same in April.  Additionally, 26 percent believed that their country will be out of a recession in the next twelve months, up three points from April.  Global recession buzz has declined 27 percent since March.  In July, however recessionary buzz perked up, primarily in Western Europe.

“We are likely to see an overall downward trend in recession discussions, but it will be choppy until consumers really feel as if they are experiencing the recovery,” said Russo.

Download the latest Nielsen Economic Current.

“After nearly two years of downward trending, we are now seeing an uptick in Canadians’ moods as the notion of recovery is taking hold,” said Carman Allison, Marketing Director, The Nielsen Company. 

Almost 40 percent of Canadians said that local job prospects will “good” or excellent” over the next 12 months, compared to just 23 percent of Americans.  More than half (52%) characterized the state of their personal finances the same way, edging out Americans, 48 percent of whom felt that way.   More than a third (37%) said that the next 12 months was a good time to buy the things they need or want.

That said, Canadians will continue to save spare cash: 30 percent said that they’d put that money into savings, 11 percent said they would invest in retirement funds and another 40 percent indicated that they would pay off debts.  But after those expenses, the Canadian consumer’s wallet seems to be thawing out a bit: almost a quarter (23%) indicated that they were spending on out-of-home entertainment, and the same percentage said that they were spending on vacations.  Another 21 percent said that they were buying new clothes.  And once recovery in full swing, Canadians want to resume buying technology upgrades and replacing major household items.

Read the full report on Canadian consumer confidence.

Chinese consumer confidence is higher in the East and North regions of the country versus the South and the West, and consumers in smaller cities (i.e., not Shanghai, Beijing, Guangzhou or the provincial capitals) are generally more confident than those in the largest cities.

“Chinese consumer confidence appears to have been boosted successfully through the government’s economic stimulus initiatives.  Additionally, many consumers in smaller cities appear to have been less affected by the downturn in the first place, so recovery is less of an issue for them,” said Mitch Barns, Greater China President, The Nielsen Company.

Half of Chinese surveyed said that local job prospects will be “good” or “excellent” in the next 12 months, compared to only 22 percent three months ago.  Nearly half of Chinese consumers described their personal finances as “good” or “excellent,” and more than 40 percent indicated a strong willingness to spend.  Saving for a child’s education continues to be a priority, with 42 percent saying that they would use spare cash for education.  Residents of the largest cities, however, indicated a greater desire to invest in the stock market or go on holidays versus residents of smaller cities.

“In this latest survey, we have increased the number of people that we interview so that we can now, for the first time, look at these data by region and by city tier.  The results are fascinating and it makes this an even more useful, insightful survey,” said Barns.  “China is a dynamic and diverse market.  By zooming in on regions and city tiers to take a closer look at Chinese consumers, we can more clearly see where the opportunities are within the country – and there are many.”

Australia ranked fifth of the 28 markets Nielsen measures, just behind fast-growing developing countries Indonesia, India, the Philippines and Brazil, and well ahead of other developed nations.

Forty-four percent of Aussies believe “now is a good/excellent time to buy the things they want,” second highest of all nations surveyed, and 59 percent described their personal finances as good or excellent.  According to Nielsen Online’s Buzzmetrics service, the number of online discussions mentioning the word “recession” dropped 56 percent between February and June this year.

Despite growing levels of optimism among Australian consumers, there remains an air of caution, with 41 percent saying that they would put extra cash aside in savings and another 40 percent focused on paying off debts.

“Despite increasing confidence, Australians will still think twice about the way they spend their spare dollars until the economy has completely recovered.  The positive news is that Australia, when compared to other developed nations, is in a better position for faster economic recovery,” said Chris Percy, Managing Director – Consumer Group, Nielsen Pacific.

Read the full press release with more results from the survey.

“In the previous Nielsen Global Consumer Confidence survey conducted in March, we were seeing the first signs that as far as the world’s consumers were concerned, the recession had bottomed out. Three months later, they’re starting to embrace the idea of recovery – which is a major turning point,” said Jonathan Banks, Business Insights Director, The Nielsen Company.

In Nielsen’s latest survey, which polled 14,029 online consumers in 28 countries late in June, 71 percent of respondents thought their country was in recession – a positive reduction of six points from a high of 77 percent when the survey ran in March 2009.

“The BRIC and Asian markets have recorded the greatest jumps in Consumer Confidence Indices in the past three months,” noted Banks. “Consumer confidence in India jumped 13 Index points, and climbed 9 points in Japan, South Korea, Hong Kong and Indonesia. Consumer confidence rose 8 Index points in Taiwan and Brazil, and 7 points in Singapore, Turkey, Russia, Philippines and the UK. The only exceptions to this upswing were in the USA and New Zealand, which held flat in the second quarter, with Germany the only country to register a decline of one Index point,” said Banks.

Even in the market registering a small decline – Germany – there are encouraging signs that a recovery is imminent. According to the Nielsen survey, nearly one in three Germans (29%) said the recession would be over in the next 12 months, compared to only 22 percent three months ago. One in three Germans also thought “now is a good time to buy the things they want”, indicating a renewed willingness to spend on discretionary items. Thirty-eight percent described their personal finances as “good” for the next year.

“This is one of the strongest indicators of a global consensus among consumers that the worst is over, and that finally, there is light at the end of this long tunnel. And consumers in emerging and Asian markets are clearly of the view that they are driving in the recovery lane now,” added Banks.
The latest Nielsen Confidence numbers are a welcome return to positive, confident territory for consumers in the developed Asian markets of South Korea, Taiwan and Japan, who have been battling economic inertia and political instability for several quarters.

“Asian consumer confidence appears to have been boosted through successful government economic stimulus packages that were speedily and effectively implemented at the onset of the global recession,” noted Banks. In the world’s second largest economy, the Japanese government implemented tax breaks, introduced cash deductions and subsidies on new car purchases, as well as providing cash payment and premium gift coupon schemes to stimulate spending.

“As well as expanding credit terms to small and medium sized businesses, in Japan there are even incentives to purchase eco-friendly household appliances as part of the government’s new environmental policy, and national toll prices for motorways have been discounted to encourage domestic tourism,” observed Banks.

Stock market gains in the BRIC and Asian markets have also had a major impact on consumer confidence,” said Banks. More than any other region, stock markets in Asia have rallied and property prices are starting to regain their pre-recession values. Russia’s stock market is up 60 percent from the start of the year and Taiwan is up over 50 percent. Brazil and Singapore’s stock markets have gained around 40 percent in the past six months and the South Korea and Hong Kong stock markets are up over 30 percent. With stock market gains so intrinsically linked to consumer confidence in Asian markets, it’s no surprise that Asian consumers are most confident about a receding recession, led by Hong Kong (-14 pts), Taiwan (-13 pts), Singapore and Japan (-12 pts), India and China (-10 pts).

“Positive economic news and growing consumer optimism in the past few months have definitely led consumers in these markets to believe that economic recovery will come sooner rather than later,” said Banks. According to the Nielsen survey conducted in March this year, 28 percent of Singaporeans said they expected their recession to end within 12 months – last month this number rose to 39 percent. UAE consumers also share this sentiment. In March, 32 percent of UAE consumers thought the recession would be over within a year but in June 43 percent said they expected the recession to be over before the middle of 2010.

Latest Nielsen data also shows that consumer confidence in the UK – a country that has suffered one of the most dramatic downturns in consumer confidence in the last year – is on the rebound, climbing 7 Index points in the second quarter. “UK consumers are getting the hang of consuming less. People with jobs – still the overwhelming majority – now have more disposable income as they reduce spending on big-ticket items like cars and holidays. With mortgage interest rates at their lowest levels, savings rates are increasing quickly and this has increased financial confidence,” said Banks.
“Consumers know that recovery won’t happen overnight but there has certainly been more good news than bad in the past few months,” noted Banks.

The decline in constant bad economic news in the media has directly impacted on the topics consumers are talking and blogging about. According to Nielsen Buzzmetrics, Nielsen’s service for measuring online conversations, the number of online discussions, or” buzz”, in the UK mentioning the word “recession” dropped around 60 percent between late March and late June this year. “People’s obsession with the recession has switched to how to live and spend more moderately in a new economic era,” said Banks.

Italian consumers have also become more optimistic, showing a strong gain of 7 Index points – their highest Nielsen Consumer Confidence Index since the second half of 2007. “Our survey supports recent Italian government figures which indicate that consumer confidence is returning to the Italian economy. In the last three months, Italian consumers’ concern for job security and the economy fell by 4 percentage points respectively, while average supermarket prices fell 0.2 percent in June 2009, indicating that consumers are less concerned about rising food bills than they were two years ago,” said Banks. The rise in consumer confidence in Italy has also been positively impacted by the government’s stimulus policies and the significant decline of negative economic coverage in the media. Online discussions mentioning the word “recession” have decreased by 35 percent this year according to Nielsen.

Globally, job security and the economy remained consumers’ top two concerns in life but even the level of these concerns has abated in the last three months and recorded declines of two and four index points respectively.

A Link Between Buzz And Spending

For the latest Economic Current, Nielsen tracked online discussions about the economy and found that since mid-March 2009, recession buzz has dropped 47 percent in the U.S., UK, Germany, Italy, Spain, Australia and New Zealand.

“Globally, Nielsen is tracking online discussions related to the recession and when the recovery may emerge. While discussions about the recovery are still quite low, we have seen that the public is talking less about the recession — often dramatically less,” said James Russo, Vice President, Global Consumer Insights for The Nielsen Company.

“In the U.S., we found that recession discussions have dropped since hitting a peak in January.  There appears to be a strong correlation between what consumers are saying in discussion groups and their subsequent actual purchase behavior.  From the end of 2008 to March 2009, when recession discussions were highest, we found that sales actually declined by 2.3 percent.  From mid-March to early June, as recession chats dropped, we found that sales actually showed a modest increase,” continued Russo.  “This is an important dynamic as we look to signs of a sustained recovery, and Nielsen will be at the forefront of this research.”

Noteworthy Highlights

• After showing some positive movement in April, U.S. consumers pulled back on shopping and how much they spent per trip. Meanwhile, the shift to value channels such as supercenters, club and dollar stores continued, as did the move to private label store brands.
• Canadians are slightly more optimistic than their southern neighbors. While they aren’t shopping any more frequently than before, they are spending more per trip. But like Americans, Canadians are also turning to private label store brands and value channels.
• Western Europe remained in a neutral position. Some countries’ consumers shifted to value channels and store brands, but they generally reduced the frequency of their shopping trips and spent no more, or in some cases, less than in previous months.
• Brazilians were the most positive of the lot, with consumers shopping more frequently.

Download the latest Nielsen Economic Current.

“Although consumers are still not shopping as frequently, we are seeing a turnaround in spending as shoppers spend more money per trip,” said James Russo, Vice President, Global Consumer Insights for The Nielsen Company. “There continues to be the emergence of optimism worldwide, and this upward trend in spending across four leading economies is further evidence that the ‘green shoots’ of economic recovery are finally breaking through. We expect to see even more forward momentum as we look to the second half of 2009.”

Noteworthy Trends

• Scores of six out of 10 GDP countries remained flat from the previous month and no country declined for the first time in four months, hopeful signs that the global economy is stabilizing as consumer confidence cautiously begins to turn up.
• The United States’ score saw a strong rebound from declines in March, up to a 2 (growth of 1% to 4%) from a 5 (as much as 4% decline). The lift is further evidence that the U.S. consumer market may have bottomed out and we will start to see modest gains in spending going forward. (Seasonality is partially a factor due to Easter falling in March last year and April this year.) While consumers are spending more money per shopping trip, they are still shopping cautiously, shifting to value channels like Target and Costco, and to private label store brands.
• India held steady, while China strengthened its score considerably, moving to a 1 (up to 5% growth) from a 3 (flat growth), a result of a massive stimulus and strong dollar and unit sales growth. This is a particularly hopeful sign given that China and India are best positioned, as the world’s leading economies, to be the leaders in a global recovery, based on export and domestic goods demand.
• Canada continued to show moderate levels of consumer spending growth, with a score of 1 (up to 5%), up from 2 (growth of 1% to 4%). Data this month shows that Canadian shoppers are spending more money per trip, possibly a result of retailers running more promotional sales to entice shoppers to stock up on goods.
• Western Europe remains in a neutral position, not showing significant fluctuations in consumer activity. Despite rising unemployment, the vast majority of consumers have regular income, which means that many are saving more.

Download the latest Nielsen Economic Current.

Download the Nielsen Economic Current media release.

According to Nielsen Claritas, they might start by taking a closer look at large, fast-growing metro areas, like Atlanta, Dallas, and Phoenix. 

These three markets ranked as the top three fastest growing U.S. markets in the last eight years — and could offer the retail industry some hard-to-come-by expansion opportunities, Nielsen reported in a new study released Monday.

“While some of these markets like Phoenix and Los Angeles have been hard hit by the recent wave of foreclosures, there has been no mass exodus from these markets or anywhere else.  People who have foreclosed most likely have not left the market but rather have just become renters,” Mike Mancini, Vice President of Data Product Management, Nielsen Claritas, and co-author of the new study, noted.  “Faltering markets, such as these, will likely rebound and continue to grow — and their underlying demographics are solid.”

As part of the study, Nielsen also identified seven key factors that correlate strongly with fast-growing, high-potential retail markets:

1) large land areas
2) booming suburban rings
3) widespread affluence
4) a growing Hispanic population
5) diversified employment
6) long commutes
7) the presence of lifestyle shopping centers

These indicators can be combined with demographic projections to identify markets that are likely to lead the way to economic recovery in the coming years.

In the meantime, according to Nielsen’s study, retailers looking for expansion opportunities should focus on booming college towns and resort locations, like Las Vegas, Austin, Texas, and Bend, Oregon; underdog college towns, like Columbia, Missouri, Corvallis, Oregon, and
Greensboro, North Carolina; knowledge worker havens, like Los Alamos, New Mexico, San Jose, California, Boulder, Colorado, and Minneapolis; and up-and-coming communities, like New Orleans, Coeur d’Alene, Idaho, and Brownsville, Texas.

View the study and accompanying press release and presentation. 

Download Nielsen Claritas’s October 30 Webinar, “New Leading Indicators of Growth — Finding Opportunity in a Slow-Growth Environment.”

Learn more about finding growth in challenging times, in the December issue of Nielsen’s “Consumer Insight” online newsletter.