Consumer Confidence in China PlummetsThursday, March 12, 2009 2:26
While there are still some reports lately that forge some level of hope that the consumers in China have not been affected by the crisis, and that their spending will help to support the Chinese economy, I have held a very different opinion.
It is a feeling/ opinion that has been difficult to prove given my supporting evidence is largely anecdotal, based on
conversations with friends, based on my unscientific measures of shopping bags in-hand, and noticing that the streets of Shanghai are actually cleaner due to reduced traffic.
Now, falling in line with the rest of the bad news, comes a SCMP article showing that consumer confidence has dropped off the chart as well.
About 45% of consumers in Beijing, Shanghai, Guangzhou, Chengdu and Shenyang said that they had already cut back on spending, according to a survey by market research consultancy DDMA. A further 15% had not yet reduced spending, but had plans to do so.
Like the recent import figures that came in, I believe it is important for there to be some better analysis of the real situation. When speaking to friend, the concerns I am hearing are that (1) they are not secure in their jobs because their firms are frozen/ laying off (2) that they fear China has yet to feel the full impact, and that with every piece of news abroad, they recognize it will come back to China (3) that until they are comfortable knowing what the wider global economy is going to do, they are going to stay put.
Update: Read Educated, urban and suddenly unemployed by Carolynne Wheeler. It is an excellent piece that humanizes the above circumstances
What does that mean for retailers? In short…. difficult times
When I walk down the streets of Shanghai (Huai Hai and Nanjing West rd to be specific), it is clear that there are fewer people on the streets and that “shoppers” are now walking empty handed. Where my office is, an area where large populations of migrants/ middle class Shanghai residents are located, the streets were deserted for 2 weeks after the new year… and stores close early now.
Where all this becomes important is that this comes back to the wider picture of what will keep this economy in positive growth territory. the banks are absolutely unleashing a torrent of easy money into the market, and NO ONE IS SPENDING.
So, if you take the GDP projects from this year and adjust for the 30% reduction in export manufacturing output, and 30% for reduced domestic consumption… where does that leave China?
Wen jiabao still says 8%… UBS says 6.5%….
Me. an unadulterated 4%… and praying it does not go further