Consumer confidence plunges

Six in 10 consumers say Hong Kong is in recession.

Research firm ACNielsen said 60% of Hong Kong consumers in the third quarter said they felt Hong Kong was in recession, up 19 percentage points from the previous quarter.

The Nielsen report said Europe's ongoing debt crisis, the fluctuating U.S. recovery and speculation about the mainland's sputtering economic growth in the last quarter resulted in increased concern about Hong Kong's own economy, with more consumers believing Hong Kong is in recession.

It said the data demonstrates how sensitive Hong Kong consumers reacted to regional and global economic conditions of its trading partners.

Analysts pointed out that cautious Hong Kong residents always reduce discretionary spending during periods of uncertainty and what Nielsen saw in the last quarter is no different from past experience as consumers pulled back on nearly every aspect of discretionary spending.

As a result, consumer confidence in the city plunged significantly in the third quarter. Nielsen said the grim global economic outlook was souring residents’ hope for better days while a fear of a worsening recession was putting a brake on consumer spending.

Consumer confidence in the third quarter fell 15 points to 89 points from 104 points in the second quarter, the lowest level since the second quarter of 2009.

Further eroding consumer confidence is the increasingly negative outlook for job prospects and personal finances in the immediate future.

Optimism for personal finances plummeted to 43% in the third quarter from 61% in the second. This loss of confidence, in turn, put a crimp on consumers' immediate spending intentions, which fell to 31% from 51% in the same period.

In the third quarter, 35% of Hong Kong residents said they were optimistic about job prospects for the next 12 months, down from 50% in the second quarter.

Nielsen said consumers cut spending in all lifestyle areas except for holidays and vacations, which is traditionally a third quarter expenditure. Spending on out-of-home entertainment fell 9 percentage points to 33%, compared to 42% in the second quarter.

Investment in stocks fell 7 percentage points in the same period. Spending for new clothes and new technology products also fell 5 and 4 percentage points, respectively.