Consumer Confidence Diverges Dramatically in its Resilience in Asia/Pacific and Middle East

January 22, 2013

New MasterCard Report investigates the potential resilience of markets in a slower growing economy

 TWEET: #MasterCard releases new report assessing #resilience of #consumer confidence in key Asia/Pacific & Middle East markets http://bit.ly/ViOUXD

Singapore, 23 January 2013 MasterCard Worldwide released a new Insights Report today which assesses the extent to which a slower growing global economy and specifically a slowdown in merchandise exports, will impact the resilience of consumer confidence in key markets in Asia/Pacific and the Middle East.

The report – “Consumer Confidence in a Weak Global Economy: An Index of Resilience 1Q, 2013”, is based on a correlation analysis of the MasterCard Worldwide Index of Consumer Confidence (MWICC) – Asia/Pacific’s most comprehensive and longest running consumer confidence survey – against merchandise export growth for 17 countries across Asia/Pacific and the Middle East. Markets with the highest level of consumer confidence, as well as those that are most resilient to a slowdown in merchandise exports have the strongest potential to weather the economic downturn. At the opposite end of the spectrum, markets with very low consumer confidence and those that are also most vulnerable to a slowdown in merchandise exports have the least potential.

Of those markets surveyed, Japan, Hong Kong and the Philippines ranked highest on the Index as “relatively resilient”; Singapore, Saudi Arabia, Kuwait and UAE ranked lowest as “very vulnerable.” The Index and its accompanying reports do not represent MasterCard’s financial performance.

“The strong growth in global demand that we saw during the decade of 2000-2010 was unique in many ways, underpinned by an unprecedented increase in global liquidity which provided a tremendous boost to the export-oriented economies in Asia/Pacific and Middle East. But growth in global demand will be a lot weaker than before. Putting it bluntly, a repeat performance is highly unlikely,” noted Dr. Yuwa Hedrick-Wong, global economic advisor for MasterCard Worldwide, and co-author of the report.

“For many markets in the Asia/Pacific and the Middle East, especially the export-oriented ones, the outlook of a slower growing global economy will mean weaker demand for exports. Thus, their ability to leverage domestic demand, especially private consumption, will be critical in supporting stronger economic growth. The extent to which they may succeed will in turn depend on how resilient consumer confidence is in these markets,” he added.

Export-oriented markets in the Asia/Pacific and the Middle East include Australia, where exports of resource and commodities to China have become the single most important driver of its economy in recent years, and Saudi Arabia, UAE and Kuwait, each of which depend notably on exports of the same. Australia ranked “relatively vulnerable” on the Index, while all Middle East countries ranked as “very vulnerable.” Japan on the other hand, a country with a domestic consumer market second only to the US, ranked “relatively resilient” and topped the list of 17 countries assessed. Similarly, in Southeast Asian markets, those with high merchandise export to GDP ratios ranked lower on the Index (Malaysia, Vietnam), while those with stronger domestic consumer markets (Philippines) ranked higher. The Index placed Singapore and Hong Kong, countries similar in their very high export to GDP ratios– at surprisingly opposite ends of the Index.

Dr. Hedrick-Wong explains: “The sharp contrast between Singapore and Hong Kong illustrates that consumer confidence in different markets can be sustained by very different market specific factors, resulting in significant differences in the resilience of the consumer confidence in response to a slowdown in exports.”

Index of Resilience of Consumer Confidence

Resilience Rank

Market

Correlation Coefficient

Category

1

Japan

0.24

Relatively resilient

1

Hong Kong

0.24

Relatively resilient

2

Philippines

0.29

Relatively resilient

3

Indonesia

0.32

Neutral

3

Thailand

0.32

Neutral

4

Taiwan

0.34

Neutral

4

India

0.34

Neutral

5

China

0.37

Neutral

6

Australia

0.41

Relatively vulnerable

7

New Zealand

0.45

Relatively vulnerable

8

South Korea

0.47

Relatively vulnerable

8

Malaysia

0.47

Relatively vulnerable

9

Vietnam

0.49

Relatively vulnerable

10

Singapore

0.50

Very vulnerable

11

Saudi Arabia

0.51

Very vulnerable

12

Kuwait

0.53

Very vulnerable

13

UAE

0.87

Very vulnerable

 

Domestic consumption: potential growth engine in a slow growing economy

With external demand weakening in the current, uncertain global economy, domestic demand becomes an important factor in sustaining economic growth. The Index of Resilience also evaluated the resilience of consumer confidence and the strength of consumer confidence to begin with, as factors that determine the potential of domestic consumption as a growth engine in a slower growing global economy.

The report found Hong Kong, Indonesia, Thailand, Philippines, India and China to be well positioned with the strongest potential to leverage private domestic consumption to support economic growth. While Malaysia, Singapore, Vietnam, Saudi Arabia and Kuwait are relatively strong in terms of consumer confidence, they are also more vulnerable to a slowdown in merchandise exports. Japan’s consumer confidence is very resilient to external shocks, but it is also very low, being stuck in pessimism for over a decade and a half, which is a persistent damper on private consumption. The UAE occupies a position all on its own, with historically strong consumer confidence while being very vulnerable to a slowdown of its exports.

“For 15 of the 17 economies surveyed, exports to Asia/Pacific economies account for more than 50 percent of their total merchandise exports,” said Desmond Choong, an independent research economist.

“Clearly, these correlations between exports and consumer confidence not only assess the resilience of the latter to a slower growing global economy, but they also underscore the relative strength of the linkages between Asia/Pacific’s domestic markets. That is to say these correlations also indicate the degree to which the consumer confidence of some markets may have an indirect impact via increased consumption – and therefore increased imports – on the consumer confidence of other Asia/Pacific markets,” he concluded.

 

MasterCard and its Suite of Research Properties

The MasterCard Worldwide Index suite in Asia/Pacific, Middle East and Africa includes the long-running MasterCard Worldwide Index of Consumer Confidence, as well as the MasterCard Worldwide Index of Women’s Advancement, Online Shopping, Index of Financial Literacy, and the Index of Global Destination Cities. In addition to the Indices, MasterCard’s research properties also include a range of consumer surveys including Ethical Spending and a series on Consumer Purchasing Priorities (covering Travel, Dining & Entertainment, Education, Money Management, Luxury and General Shopping).

MasterCard also regularly releases Insights reports providing analysis of business dynamics, financial policies and regulatory activities in the Asia/Pacific, Middle East and Africa region. Over 80 Insights reports have been produced since 2004.

MasterCard has also released a series of four books on Asian consumer insights, authored by Dr. Yuwa Hedrick-Wong, Global Economic Advisor for MasterCard Worldwide and published by John Wiley & Sons.

 

About MasterCard Worldwide

MasterCard (NYSE: MA), www.mastercard.com, is a global payments and technology company. It operates the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard’s products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone. Follow us on Twitter @MasterCardNews, join the discussion on the Cashless Conversations Blog and subscribe for the latest news.

 

Contacts:

Georgette Tan, MasterCard Worldwide, georgette_tan@mastercard.com, +65 6390 5971

Robert O’Brien, Weber Shandwick, robrien@webershandwick.com, +65 6825 8064

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