Consumers Around the Globe Feel More Confident About the Economy

Global-CityAccording to data recently released by Nielsen, consumers around the world are feeling more confident about the economy. This data suggests that the global economic situation will continue to improve in the near future. However, there is a lot of variation between countries and confidence within North American markets was unchanged. This article will explain the highlights of this global research on consumer confidence, along with its limitations and some applications for the U.S. business community.

Global consumer confidence started 2015 with an index score of 97. This represents a one point increase from last quarter and from the same time last year, according to the Nielsen Global Survey of Consumer Confidence and Spending Intentions. The Index considers a score of 100 as an average level in the economy. This suggests that global sentiment about the economy around the world has yet to fully recover from the financial crisis, but nonetheless, more and more people are seeing an improving situation for themselves.

The Nielsen Consumer Confidence Index measures perceptions on the local job prospects, personal finances and immediate spending intentions from consumers in different economies. The research is based on a dataset with more than 30,000 respondents in 60 countries.

While the Index is reported as one global average, there’s a lot of variation between the individual countries. Events that improve consumer confidence in one location can hurt the economy somewhere else. In this case, the recent decline in oil prices has a polarizing effect on different economies. In this recent data, countries that import a lot of oil-based products (e.g. gasoline, heating oil, machine lubricants, etc.) are seeing a boost in consumer confidence since all of these products are now cheaper, giving the economy additional funds to fuel growth. On the other hand, countries like Russia, Venezuela and Brazil are facing economic challenges brought about by a huge price drop in their primary export.

“While confidence across global regions remained relatively stable in the first quarter, there is considerable variation across different markets,” said Louise Keely, senior vice president, Nielsen, and president, The Demand Institute. “In the first quarter of this year, the key emerging markets of Brazil and Russia saw large declines in confidence for the second consecutive quarter, with the drop in oil prices and the political instability in Brazil. China dropped another index point at the start of this year, which comes after a four-point decline in the previous quarter, reflecting the recent slowdown in GDP there.”

Things are looking brightest within Asia-Pacific economies, where the consumer confidence was 107 (the highest regional score) up one point from the previous quarter. North American confidence remained the same  at 106. Confidence in the Middle East/Africa increased one point to 96 and as did Europe which is now at 77.  The good news didn’t extend to Latin America which saw its lowest score since 2011. With a score of 86, consumer confidence in Latin America decreased two points, the only region to show a decline.

It should be noted that the Nielsen Consumer Confidence Index is derived from surveys of people with internet access. It would be much harder to conduct this kind of research without relying on online surveys, but this methodology horribly skews the results. The Digital Divide isn’t something to be ignored and perceptions about the economy may be very different for people who lack the resources to gain access to the internet. In contrast, when Nielsen calculates the Consumer Confidence Index for the US for the Conference Board, they use mail surveys.

Speaking of the US Consumer Confidence Index, it’s interesting to note that since the data for this global confidence study was collected, newer data about consumer confidence in the U.S. shows a slight decline after several months of gains. Back in April, the Conference Board reported that the Index now stands at 95.2, which was down from 101.4 in March. New data about the U.S. consumer confidence will be released on May 26.

Applications for this Research

A growing confidence in the economy from people around the world is great news for business owners, entrepreneurs and investors in the U.S. When people are confident in their prospects for jobs and improving their life situation, they buy more and the economy expands even faster. Investors should be looking for opportunities for investment within Asian-Pacific markets. This area is need of investments (as seen by the creation of the Asian Infrastructure Investment Bank) and small investments by entrepreneurs will pay off as the economy benefits from larger multinational efforts to grow asian economies.

Improving consumer confidence is also good for business owners who can sell more goods to clients overseas. When people have more money to spend, they can indulge on luxuries like imported products from American retailers. With a good website and internet marketing, businesses can break into new markets at a time when those consumers are looking for ways to take advantage of the economic upturn.

There is even opportunities for investment in countries where consumer confidence is falling. In places where low oil prices have slowed the economy, entrepreneurs can afford to buy properties or invest in business that will become valuable again when these economies improve ( e.g. buying low-price commercial property in a good area of Brazil).

Keep in mind that in some countries with a low consumer confidence score, there are political forces that are keeping the economy from growing. These countries are bad targets for investments because the political situation may not change and foreign investments in these situations are rarely secure. Though there are certainly some cheap but desirable properties available in Venezuela, American investors would be ill-advised to buy them due to the Venezuelan government’s hostility towards Americans from time to time. Similarly, investing in Russia at the current time is equally problematic because the situation in Ukraine can lead to more economic sanctions or embargos at any moment.

The big takeaway from this research is that on average, consumers across the globe are expecting things to get better. This means that are a lot of opportunities for entrepreneurs to invest in these markets or sell products to the people that live there. Business owners and investors should be on the lookout for these opportunities before they pass them by.

For some more data of interest to investors, read this article about the current state of the commercial real estate market in the U.S.

Donald Postway

About Donald Postway

Donald Postway is a freelance communications specialist and business analyst. He has a master's degree in public administration and a bachelor's degree in communication, both from the University of North Florida. He has worked in a variety of industries, including local government, information technology, marketing, retail and more.

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