Unemployment Creates Confidence Crash Worldwide
The United States is not the only country where workers are in a funk because of the economy. Consumer confidence fell in 25 out of 52 countries in the fourth quarter of 2010, as hope for a global economic recovery evaporated at the end of last year, according to the latest edition of the Nielsen Global Consumer Confidence Index, which tracks consumer confidence, major concerns and spending intentions among online consumers.
According to the survey, which polled over 29,000 Internet consumers in 52 countries in November 2010, 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.
"Global consumers ended 2010 more pessimistic than at the start of last year. As the immediate economic and financial reality remained fragile, and with the lack of positive indicators throughout 2010, consumers were given a harsh reality check that full recovery is still a long way off," said Dr. Venkatesh Bala, chief economist at The Cambridge Group, a part of The Nielsen Company. "The lingering impact of the great recession is further evidence of a new normal."
The Nielsen Consumer Confidence Index provides a single indicator of consumer sentiment toward the current economic situation as well as intentions and expectations for the future. Levels above a baseline of 100 indicate degrees of optimism.
Recessionary woes live on
"Global consumers -- especially in the West -- are bracing themselves for another year of flat to sluggish growth in 2011," Bala said. "Job creation and employment numbers have fallen below expectation, and even though many countries are officially out of recession, many consumers are still living -- and expect to continue living -- a cautious recessionary lifestyle that is restricting domestic spending and demand. Going forward, rising prices in several emerging markets such as China and India have the potential to dent consumer confidence and spending, especially if their respective governments decide to expand policy actions to combat higher inflation."
Forty-five percent of North Americans still expect the recession to last for another year, compared with 39 percent of Europeans and 19 percent of Asia Pacific consumers. "The U.S. jobless rate remains at the heart of the issue for Americans," said James Russo, vice president of Global Consumer Insights at The Nielsen Company. "While the jobless rate dipped a meager 0.3 points in December to 9.4 percent -- its lowest level in 19 months -- it has topped 9 percent for 20 months straight, which is the longest streak on record."
Hitting us where we live
In the second half of 2010, the number of consumers with no discretionary income rose from 22 percent to 31 percent in North America, from 16 percent to 20 percent in Europe, and from 10 percent to 15 percent in Latin America. "Consumers in all regions are feeling the financial squeeze more than any other time during the global recession. In addition to concern for global and national economic issues, consumers are also struggling with rising daily costs such as food, utilities, petrol and transport prices," said Russo.
"Consumers have weathered the worst of the storm, but the pragmatic behavior prevalent in 2010 will continue into 2011 as headwinds to growth persist," Russo continued. "Coping strategies will represent a combination of essential and discretionary spending, where the focus will be saving on gas and utilities, reducing spending on grocery, take-out, clothing and entertainment expenses. For emerging countries, consumers are focused more on discretionary strategies, such as reducing phone costs and spending less on take-away meals. For developed markets, basic and essential strategies like reducing grocery costs will dominate."