Sentiment = Sales
“A nine-point surge in consumer confidence signifies a welcome return to positive territory. It really demonstrates that in the last six months, a majority of consumer sentiment across the globe has shifted gears from recession to recovery — the tide has turned,” said James Russo, Vice President, Global Consumer Insights at The Nielsen Company. “In this economic climate, sentiment is closely correlated to actual sales. For example, in Australia, consumer confidence was up 11 points in the third quarter, and strong economic conditions prompted the Reserve Bank of Australia to raise rates, becoming the first G20 country to do so. Correspondingly, we have seen sales increase 2 percent in each of the last two months in defined fast moving consumer goods (FMCG) categories while online sentiment (buzz) regarding the recession is at the lowest levels since we began tracking that dynamic in January 2009.”

• Read additional insights on global spending trends in the Nielsen Economic Current

Majority of countries show gains
Consumer confidence rose in 45 out of the 52 countries compared to six months ago (Ukraine and Saudi Arabia were added in the latest round of the survey).  In April, the Index hit its lowest point of 77 index points, but as massive stimulus plans began to take effect around the world during the second quarter, consumer confidence slowly began to recover.

Key Highlights

• Consumers in India, Indonesia and Norway topped the confidence index, while the most pessimistic consumers were in Latvia and Japan.
• Hong Kong posted the largest consumer confidence increase in the third quarter compared to Q2, up 14 points from 79 to 93 index points, followed by South Korea (+13 points) and Brazil (+12 points).
• Among other BRIC nations, consumer confidence rose 8 points in India, 6 points in China and 4 points in Russia compared to the previous quarter.
• Consumer confidence fell in only two countries in the third quarter: Spain (-4) and Japan (-2).
• Australia and New Zealand also posted double-digit increases during the last quarter, while Europe’s two largest economies, France and Germany, posted the highest increases in the Eurozone, up 7 and 5 points, respectively.

Nielsen’s global consumer confidence in October rebounded to almost the same level as the first half of 2008 before the very worst of the financial crisis hit global markets. “The survey shows how much the pace of economic recovery has accelerated in the last six months, especially in Brazil and some Asian markets,” said Russo.  “Nielsen consumer, retail and media data also shows a trend of consumers shifting gears from recessionary into recovery mode.”

The Nielsen Global Consumer Confidence Index tracks consumer confidence, major concerns and spending habits among more than 30,500 Internet users in 54 countries. The latest round of the survey was conducted between 28 September and 16 October 2009.

With the nation seemingly emerging from recession, American consumers remain skittish about spending their money during this upcoming holiday season according to new research from The Nielsen Company.  Households continue to focus on “essential gift giving” such as staple consumables, candy, beverage/alcohol and entertaining at home, and 86 percent said that they expect to spend the same or less this year than last — with a 7 percent increase in those indicating they would spend less.  Overall, Nielsen is projecting that holiday sales will rise 0.03 percent this year, accounting for $90 billion in dollar sales.

“Given everything the consumer has absorbed over the past 12 to 18 months, the fact that we expect this coming holiday season to be flat in dollars can be viewed as a modest positive,” said James Russo, Vice President, Global Consumer Insights at The Nielsen Company. “Americans have undergone a fundamental change in how they spend their money, and the days of stretching finances to make purchases not deemed as necessary are over, at least for the time being.  That said, our research has shown that consumers are looking forward to loosening their purse strings a bit, but only once they feel more confident about the state of the economy and their personal financial situation.”

Update: James Russo Discusses Holiday Spending on CNBC

Other key findings from the research include:

• Traditional items such as apparel, toys and technology will be most popular categories, albeit at restrained levels and primarily sold in “value” channels.
• Products aligned with at-home entertainment such as cookware, kitchen items, bed and bath accessories and alcoholic beverages will do well.
• Gift cards are one category where consumers plan to spend more this holiday season, followed by toys and apparel.
• Value retailers such as dollar stores, online, discounters and club stores will attract the lion’s share of holiday spending as consumers minimize trips and search for the best values, while office supply, pet stores, home improvement and drug retailers are likely to feel the brunt of the economic slowdown.
• Some 20 percent of households said that they had no plans whatsoever to entertain at home or away from home during the holidays.
• Spending cut-backs are being driven by all income groups.

So how can retailers make the most of this season? They need to recognize that U.S. consumers are, first and foremost, seeking value and will start their holiday shopping well before Thanksgiving.  They should also reach out to their best customers and make them feel special and give them a reason to shop at their outlet during the season and into 2010.   Successful retailing has always been about delivering the right product at the right price and in the right place.  The difference now is effectively mining and communicating to the right consumer as an active participant in driving growth.

“There are hot spots of a recovery,” commented James Russo, Vice President, Global Consumer Insights at The Nielsen Company. “However, until the labor market stabilizes and returns to growth in the U.S, spending will continue to be restrained.”

Nielsen Economic Current Key Indicators
Country	Trend	Jun-09	Jul-09
Brazil		2	2
Canada		3	3
China		2	2
France		3	3
Germany		3	3
Hong Kong		2	2
India		1	1
Italy		3	4
Spain		3	3
Taiwan		4	3
United Kingdom		2	2
United States		3	3
Source: The Nielsen Company 1=Very Strong Growth >/= +5%; 2 = Growth between +1 and +4%; 3 =Neutral Between -1 and +1%; 4 =Negative between -1 and -4%; 5 = Very Negative

As expected, the strongest growth continues to come from the emerging economies of Brazil, China, Hong Kong and India – although all remained unchanged from the previous month. While Taiwan is the only country that showed a measurable gain this month, it essentially remained flat as it was the only country that declined last month. Of note in Brazil, interest rates and unemployment rates are falling with the expansion of industrial activity, and there are signs of recovery in food product categories and non-basic product categories. In Hong Kong, previous growth in household categories due to the H1N1 “swine flu” virus has been slowing, but baby products continue to be the most lucrative category demonstrating the fastest growth.

In North America, Canada continues to outpace the U.S. as evidenced by gains in dollar sales and promotional activity, while in the U.S., frequency of shopper trips and transaction size continued to slow despite aggressive price reductions as consumers remained cautious about the outlook.

Western Europe also remains mired in a prolonged period of sluggishness. However, promotional activity appears to be having a positive effect on sales with the exception of Italy, the only country showing a significant decline this month, where coincidentally, promotional activity also dropped. France saw continued growth in value channels, while unit and dollar sales in Germany remained moderate, and in the UK, there was improvement in volume sales and premium store brands.

Download the latest Nielsen Economic Current.

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.

The middle of summer marks the beginning of the Back to School (BTS) season, as parents and kids across the country start to prepare to return to class rooms in late August and early September.  The excitement of school starting isn’t just felt by the kids – retailers also look forward to the season, as it’s an incredibly important time for the $2.5 billion office/school supplies category.  Additionally, with the economy mired in a steep recession this season, the BTS season will be closely watched for signs of a recovery in spending. Half of annual unit sales of some related products occur during the BTS period, accounting for 36-38 percent of annual revenue.

This year, as the US continues to be in the grips of recession, Nielsen is forecasting a dollar sales rise of 0.4 to 1.3 percent, to $2.17 billion, a pace below the growth achieved in 2008.  Unit sales will drop to 1.18 billion, down 5.5 percent from 2008.

In 2008, Nielsen predicted that dollar sales of BTS supplies would rise 2.6 percent; the actual result was 2.4 percent.

“Unlike the winter holidays, back to school shopping, to some extent, is not viewed as discretionary by consumers. Kids must have certain items at the start of the new school year.  That said, we expect sales to increase at an extremely modest level in dollar terms in 2009.  The nation is firmly in the midst of recession, so consumers will spend their money carefully, as they have for the better part of a year, and focus on purchasing the essentials,” said James Russo, Vice President, Global Consumer Insights at The Nielsen Company.

One peripheral category which is forecast to gain is bottled waters. Often considered a  discretionary item, bottled water is consumed as a staple, and is expected to out-pace juice sales with growth of 3.57%.

“The winners this season will be retailers who offer strong discounts and appeal to the consumer’s desire for savings and value. Look for gains from supercenters, dollar stores, drug stores and to a lesser extent, club and grocery stores,” said Russo.

Back-to-school categories include office/school supplies, artist/hobby supplies, scissors and tape/glue.  Retail outlets covered by Nielsen are food, drug and mass merchandisers, including Walmart.  Figures do not include dollar stores, online sales or office supply retail chains.

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.

Restraint will be the new mantra among consumers, according to the Nielsen Global Consumer Confidence Survey. But, that doesn’t mean they won’t start spending again in the near future.

Respondents to the poll conducted in April, across 50 countries making up 86 percent of the GDP, said they would continue to focus on fiscal responsibility. Yet, “they will allow themselves some of those little indulgences,” said James Russo, vice president, Global Consumer Insights. “Perhaps pent up demand will play itself out and they’ll take that vacation they put off, go back to casual dining and increase out of home entertainment activities such as movie going.”

In April, 56 percent of consumers said they were spending less on new clothes. However, only 22 percent said they would continue to do so with an economic recovery predicted by year’s end.

More than half (53 percent) also cut down on out-of-home entertainment, still only 20 percent said they planned to maintain this behavior. And, while 45 percent of respondents shied away from take away meals, only 24 percent plan on avoiding these more expensive meals moving forward.

Still, consumers clearly indicated that they would remain focused on savings past the recovery. “A whole new value system has emerged,” said Russo. “One of casual restraint. There is a focus on fiscal responsibility and budgeting, but that doesn’t mean there isn’t a market for indulgences. I don’t mean diamond jewelry, but moderation will be key and you may see consumers begin to trade up and move back to mainstream retailers.”

One behavior that will not change as drastically is trying to save on gas and electricity. Slightly more than half of respondents (51 percent) said they did so in April. Forty percent of consumers said they would continue to keep an eye on such services. The same holds true with the telephone company with 34 percent currently acting with restraint and 21 percent looking to do so moving forward.

Nielsen conducted a similar study in October and it proved telling. From Oct. 2008 to April 2009, consumers across 15 behavioral segments followed through on their plans to cut back on discretionary purchases while increasing levels of savings. For example, in April, most of the 40 percent of consumers who said they would delay upgrading technology followed through with their promise. More than a third (34 percent) said they’d use their car less-29 percent ended up doing so. And 33 percent said they’d cut down on vacations and delay replacement of major household items. In both instances, 34 percent of consumers actually did.

“Global consumer spending is still moderate from last month and confidence in the economy remains low,” said James Russo, Vice President Global Consumer Insights for The Nielsen Company. “While there is growing optimism worldwide in an economic recovery, U.S. and China consumers remain the most cautious as they continue to shift towards purchasing store brands and cut back on discretionary spending, such as entertainment outside of the home and other personal luxury items.”

Nielsen’s scorecard ranks national economic performance on a scale of 1 to 5, with 1 representing very strong growth (over 5%).

According to this month’s scorecard, seven out of 10 GDP countries remained flat from the previous month. India continues to be the only country that scored a 1 in March 2009, while Canada once again scored a 2 (growth between 1% and 4%). Spain jumped from a 5 to a 3 as consumers spent more per trip and shopped more frequently than in February. China slipped from a 1 to a 3, while the U.S. dropped from a 4 to a 5, the only country to rank as a 5.

Download Nielsen’s latest Economic Current.