MUMBAI: Amid fading hopes for a full economic recovery this year in most parts of the world, Indians have emerged as the most optimistic consumers globally.

The consumer confidence levels in India have risen by two points and reached 131 index points, according to the latest edition of the Nielsen Global Consumer Confidence Index, which tracks consumer confidence, major concerns and spending intentions among online consumers. 
 
The Nielsen Consumer Confidence Index provides a single indicator of consumer sentiment towards the current economic situation as well as intentions and expectations for the future. Levels above a baseline of 100 indicate degrees of optimism.

According to Nielsen, however, there is an overall decline in Indian discretionary spends. But the highest decline is seen in Indians putting spare cash into new clothes, which has gone down eight per cent to 31 per cent compared to the last round of the survey.

Another item on the spare cash list that has taken a big hit is the out of home entertainment, which has gone down by six percentage points to 23. Paying off debt/ credit cards/ loans (29 per cent) and retirement funds (24 per cent) has experienced a five point drop.
 
India ranks third globally in putting spare cash into retirement funds, behind China and Czech Republic (both 30 per cent).

In the fourth quarter of 2010, the percentage of Indians who invest in stock market related schemes has gone down by three per cent to 45 compared to the last leg of the survey. India ranks third globally for a country that puts spare cash into shares and stocks, behind Hong Kong (56 per cent) and China (51 per cent), says the report.

A four per cent drop is seen in the number of Indians who put their spare cash into new technology products and it has gone down to 38 per cent, says Nielsen. But still, Indians state spending on technology as their third preference when it comes to spare cash utilisation. On the global ranking, India ranks second in a population that plans to spend on new technology products, while China leads with 41 per cent votes.

Holidays/ vacations (35 per cent) and home improvements/ decorating (34 per cent), though, rank fourth and fifth respectively on the spare cash utilization list, having dropped by three per cent when compared to the survey in the previous quarter.

Says Nielsen Company managing director-consumer, India Justin Sargent, “The decline in spending is a cause of worry to some extent. Indians are weighing their options against a global backdrop of a recessionary mindset, so even though they are the most confident global consumers, Indians are still wary of going out and spending.”

Seven out of ten Indians (72 per cent) have changed their spending habits to save on household expenses, which is two percentage points higher than in the third quarter.

Also, more than half the Indians (51 per cent) surveyed now spend less on new clothes to cut down expenses; however, the percentage of Indians who plan to cut down buying new clothes has gone down by seven per cent compared to the previous quarter. 50 per cent Indians try to save on gas and electricity, compared to 56 per cent in the previous round who said they would cut down on gas and electricity to save on household expenses.

According to the report, 43 per cent of the Indians surveyed say they will cut down on out of home entertainment, 41 per cent on telephone expenses, 38 per cent on holidays/ short breaks and 35 per cent will delay upgrading technology, e.g. PC, mobiles, etc. to save on household expenses.

According to Nielson, there is a fair amount of correlation on items that Indians have decided to cut down spending on to save on household expenses and the items that show a decline in discretionary spends, like decline in spending on new clothes, out of home entertainment, new technology products, all have taken a hit.

As per the survey, the top five activities that Indians say they will continue to cut down expenses on even after economic conditions improve are – to try and save on gas and electricity (37 per cent), which has gone down by nine percent compared to the previous round of the survey; spend less on new clothes (22 per cent); cut down on telephone expenses (20 per cent), cut down on take-away meals (17 per cent); and look for better deals on home loans, insurance, credit cards, etc (16 per cent).

“Global economic conditions are acting as a deterrent to the spending habits of Indians. We saw a resurgence in spends in the previous two quarters but the last quarter of 2010 shows a decline in spending intentions. Under the current scenario, marketers will have to try harder to get the consumer to reflect the confidence that they show in their job prospects and state of personal finances in their spending habits,” said Sargent.

The survey, which polled over 29,000 Internet consumers in 52 countries in November 2010, says confidence levels fell in half of the countries surveyed as widespread concern for unemployment, job creation, rising food and utility costs eradicated any expectation of sustained economic recovery. The global consumer confidence index at the end of 2010 remained unchanged from the previous quarter at 90 and finished the year two index points below the start of the year.

However the percentage of Indians who think that the country is presently in recession has gone down by three per cent to 30 when compared to the last leg of the survey. Three out of ten Indians think that the country is in an economic recession.

Out of those who think that India is in a recession, 55 per cent believe that the country will be out of recession in the next 12 months, which again indicates an overall positive consumer outlook for the economy. Globally, India ranks first as a country that believes that they will be out of the economic recession in the next 12 months.

States Sargent, “India has topped the Consumer Confidence survey in all four quarters of 2010 and has also seen a steady rise in index points. This is a good sign for us as this means that the economy is fast moving out of the slowdown. But global economic conditions have made Indians wary about the future and they are exercising some restraint in their spending habits.”

Philippines followed India to the second spot with 120 index points and Norway came third with 119 index points. Globally, confidence levels fell in 25 out of 52 countries surveyed in Q4 2010 as hope for a global economic recovery evaporated at the end of last year.

Amongst the 52 countries that participated in the survey, 14 saw a consumer confidence index of 100 points or higher, nine of which hail from Asia Pacific This is an increase compared to 11 countries who hit the 100+ index mark one year ago.

Meanwhile, nine out of ten Indians (90 per cent) are optimistic about their job prospects in the next 12 months. This is a percentage point lower than in the last quarter, but India tops the list of countries who think that their job prospects are excellent or good in the next 12 months.

The percentage of Indians who think that their job prospects are “excellent” has gone up from 29 to 31 per cent compared to the previous quarter. Nearly six out of ten Indians (59 per cent) consider their job prospects “good”. Norway (83 per cent) and Singapore (79 per cent) are the next most optimistic nations on job prospects in the next 12-month period.

Not only job prospects, Indians are also optimistic about the state of their personal finances. More than eight out of ten Indians (84 per cent) are optimistic about their personal finances in the next twelve months, which is also the highest ranking globally.
 
 This has gone up by a percentage point compared to the third quarter of 2010. Eighteen per cent Indians consider their state of personal finances “excellent” and 66 per cent consider it “good”. Indonesia (81 per cent) and Norway (79 per cent) are the second and third most optimistic nations respectively in terms of the state of their personal finances.

Major Concerns for Indians

Over the next six months Indians are most concerned about increasing food prices, with 15 per cent Indians considering it their biggest concern.

India ranks fourth globally in its concern for increasing food prices. In fact concern levels around increasing food prices have remained the same for both the third and fourth quarter.

China tops in its concern over increasing food prices with 19 per cent of consumers in China voting it as the biggest concern over the next six months.

Following a similar trend as in the previous quarter, work/ life balance (12 per cent) and job security (10 per cent) are the second and third biggest concerns for Indians in the next six months, says the survey.

Other concerns for Indians are Children‘s education and/or welfare (8 per cent) and parent‘s welfare and happiness (8 per cent – 3rd highest globally). Children‘s education and/or welfare have moved up the concern list and concern over parent‘s welfare and happiness has increased by two percentage points. Concerns surrounding terrorism (7 per cent – 4th highest globally) has increased for Indians.

“Increasing food and fuel prices remain a big concern for Indians and has a significant bearing on their lifestyles as they try and balance rising costs by cutting down other living expenses,” explains Sargent.