Two-speed economy drives sentiment down

Published on Wed, 02/05/2012, 04:00:44

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The two-speed economy continues to fuel the low consumer sentiment which has dropped to the lowest levels since the global financial crisis hit, according to the latest Nielsen survey.

Of the 31,000 online consumers surveyed in 56 countries between February 10 and February 27, Australians reported the second most significant drop in confidence after Poland with a decrease of eight index points to 95. Contrastingly, global consumer confidence increased five index points to 94 in the first quarter of 2012.

Chris Percy, managing director, Nielsen Pacific, said the brief spike in confidence reported in the previous quarter was mainly due to the two consecutive interest rate cuts in November and December.

“With economists predicting further rate cuts at the start of 2012, consumers were disappointed when these failed to materialise. To make matters even worse, the major banks raised their home loan interest rates putting further pressure on households,” he said.

“The Reserve Bank of Australia’s rationale for keeping rates on hold is to counteract the booming resources sector. While these rates may be appropriate for the mining industry, they are not suitable for the rest of the country’s economy, particularly the retail sector which continues to struggle, fuelling the notion of a polarised, two-speed economy.”

When asked what their biggest concern is over the next six months, 18 per cent of Australian consumers indicated increasing utility bills and equal numbers highlighted job security and the economy (13 per cent each). Only three per cent reported having no concerns.

Tellingly, more than one-third (36 per cent) of Australians believe we are currently in a recession.

“Australians’ growing concerns over the nation’s economy, coupled with the high dollar and rising unemployment, continue to influence consumer behaviour and soften sentiment — only a third of Australians (34%) believe that the job market is in a favourable condition. Contrast this to the previous quarter, where nearly half (47%) thought that job prospects were good,” Percy said.

The first quarter Nielsen global survey found that overall confidence rose in 68 per cent of global markets measured, compared to the fourth quarter of 2011 where confidence increased in just 21 per cent of global markets. Confidence in the first quarter of 2012 increased in 38 out of 56 markets, fell in 16 markets – including Australia – and remained flat in two.

Regionally, Asia-Pacific nations are among the most positive consumers worldwide holding seven of the top 10 confidence rankings, and India currently ranked as having the highest confidence globally at 123 index points.


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