Malaysia Ends 2016 With A Brittle Consumer Confidence Level

Kuala Lumpur, Feb 14 – The Malaysian consumer confidence ended 2016 on a gloomy note as the index dipped five points from third quarter to 84 percentage points (pp), according to the latest Nielsen Global Survey of Consumer Confidence and Spending released today by Nielsen, a global information and measurement company.

Chart 1: Nielsen Consumer Confidence Index – Malaysia vs. Global (2010 – 2016) [%]

In the latest online survey, confidence levels in Southeast Asia continue to remain high with four out of six countries in the region scoring above the 100 pp mark, Singapore and Malaysia being the exception. The Philippines (132 pp, unchanged from last quarter), Indonesia (120 pp, -2), Vietnam (112, +5) and Thailand (110 pp, +2) retain their titles as the top 10 most confident countries globally while Singapore scored 86 pp (-8 from previous quarter). 

Globally, Malaysia ranked 37th most confident country in Q4 2016 (down 7 spots from last quarter). The average global consumer confidence is 101 pp (+2 pp versus last quarter). 

“Malaysia now has one of the lowest consumer confidence ratings in Southeast Asia, which does not bode well for local demand in the country for 2017. With such low confidence level, we cannot expect consumer spending levels to move positively for the next six months. As such, I believe that consumer spending will remain flat at best.” says Richard Hall, Country Manager of Nielsen Malaysia

The Nielsen Global Survey of Consumer Confidence and Spending Intentions, measures consumer confidence, perceptions of local job prospects, major concerns and spending intentions amongst more than 30,000 respondents with Internet access in 63 countries. Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism. Within a country, period-to-period movements of seven points or more are considered statistically significant.

Chart 2: Nielsen Consumer Confidence Index, Southeast Asia vs. Global (2016) [%]

MALAYSIAN CONSUMERS 

The economy (55%), increasing food prices (25%) and political stability (21%) has been listed as Malaysian consumers’ top key concerns in Q4 2016. 

More than four fifth of the respondents (85%) also believe that the nation is in a recessionary state (+8% from last quarter) and at least one in two Malaysians perceive that their state of personal finances to be either not so good or bad in the next 12 months (52%, +5% from previous quarter). 

At least two thirds of Malaysian respondents are also feeling less optimistic about local job prospects over the next 12 months being not so good or bad (63% versus 59% per last quarter).

Other areas of concern that registered a small rise compared to previous quarter include increasing utility bills (10%, up 6%) and increasing fuel prices (9%, up 3%). (See Chart 3).

“Concern about the economy increased in the fourth quarter (with 85% of Malaysian respondents believing the country is in recession) despite all economic indicators being positive,” observes Hall. 

“Consumers are also increasingly worried about rising food, utility and fuel costs, which, together, are the second-biggest concern after the economy overall. The continuing devaluation of the Ringgit could also be top of mind for most consumers as the prolonged situation means that suppliers will potentially have no choice but to pass on higher import costs to consumers in the long run. In addition, as Malaysia enters a potential election year in 2017, concerns about political stability have increased, consistent with the trend we saw before the last election.”

CAUTIOUS SPENDING AMONGST MALAYSIAN CONSUMERS

Whilst consumers in Southeast Asia remain to dominate the world’s top 10 when it comes to channeling any spare cash into savings after covering essential living expenses, only 59% of Malaysians would do so compared to 65% in previous quarter (10th place globally on depositing extra spare cash into savings). 

Consumers in Vietnam retains its first spot (76%) followed by Indonesia in third (71%), Singapore in fifth (65%), the Philippines in sixth (64%) and Thailand in eighth (63%). The global average of consumers putting spare cash into savings is 50% (-2% from last quarter).

As Malaysian consumers focus on building their savings, they are also tightening their belt when it comes to big ticket indulgent. Only about a third of Malaysians would go on vacations/holidays (30% versus 45% last quarter). 

The survey also revealed an overall cautious spending amongst Malaysian consumers in Q4 2016 with decline in spending on new clothes (21%, -15% from previous quarter), new technology products (13%, -7%), home improvements/decorating (13%, -5%) and out-of-home entertainment (16%, -3%). (See Chart 4).

Although about two in five respondents continue to pay off debts, credit cards and loans with any spare cash (41%, +1% from previous quarter), there has also been a slide among respondents putting in any spare cash into retirement funds (19%, -7%) and investing in shares of stock or mutual funds (28%, -6%). Interestingly, at least one in 10 Malaysians say they do not have any spare cash after covering essential living expenses (11%).

“Limited spare cash seems to be a key factor for Malaysian consumers and with their increased concerns on rising prices, they obviously feel that they have less money to save or spend on non-essential items.” observes Hall.

In view of the increasing general cost of living in the country, Malaysian consumers continue to be prudent about their spending habits. About nine in 10 respondents have said that they have changed their spending habits to improve household savings in the past 12 months (88%, +2% from last quarter). Over half of Malaysians continue to spend less on new clothes (58%) and out-of-home entertainment (55%) while at least one in two Malaysian consumers have switched to cheaper grocery brands (51%) in the past year to save on household expenses. (See Chart 5).

However, should economic conditions do improve, at least one quarter of Malaysian consumers say they will continue to cut down on out-of-home entertainment (29%), spend less on new clothes (28%) and switch to cheaper grocery brands (27%).

FMCG SECTOR GROWTH FLAT IN Q4 2016

The Fast Moving Consumer Goods (FMCG) sector registered a small increase in Q4 2016 with a growth of just 1.4% compared to the same quarter in the prior year. However, all FMCG super categories recorded a positive growth except for Beverages which saw a decline of 3.9%. Health & Wellness logged the biggest growth (13.4%) followed by Personal Care (5.5%), Household (5%), Snack & Confectionery (2.7%) and Grocery (0.9%).

“The FMCG market was static in Q4 after two quarters of growth which was driven by market adjustment following the GST implementation in 2015. This lower single digit growth level can be expected to continue into 2017 as we see consumer confidence take another dip in Q4 2016.” notes Hall.

Chart 3: Top 10 major concerns among Malaysian consumers (2016) [%]

Chart 4: Top 10 areas where Malaysian consumers are spending their spare cash (2016) [%]

Chart 5: Top 10 actions Malaysian consumers have taken to improve household savings in the past 12 months (2016) [%]

Source: Nielsen Global Survey of Consumer Confidence & Spending Intentions, Q4 2016

About the Nielsen Global Survey

The Nielsen Global Survey of Consumer Confidence and Spending Intentions was conducted 31 October – 18 November 2016 and polled more than 30,000 online consumers in 63 countries throughout Asia-Pacific, Europe, Latin America, the Middle East/Africa and North America. In Malaysia, the sample size is 500. The sample includes Internet users who agreed to participate in this survey and has quotas based on age and sex for each country. It is weighted to be representative of Internet consumers by country. Because the sample is based on those who agreed to participate, no estimates of theoretical sampling error can be calculated. However, a probability sample of equivalent size would have a margin of error of ±0.6% at the global level. This Nielsen survey is based only on the behavior of respondents with online access. Internet penetration rates vary by country. Nielsen uses a minimum reporting standard of 60% Internet penetration or an online population of 10 million for survey inclusion. The China Consumer Confidence Index is compiled from a separate mixed methodology survey among 3,500 respondents in China. The sub-Saharan African countries in this study are compiled from a separate mobile methodology survey among 1,600 respondents in Ghana, Kenya and Nigeria. The Nielsen Global Survey, which includes the Global Consumer Confidence Index, was established in 2005.

About Nielsen

Nielsen Holdings plc (NYSE: NLSN) is a global performance management company that provides a comprehensive understanding of what consumers Watch and Buy. Nielsen’s Watch segment provides media and advertising clients with Total Audience measurement services across all devices where content—video, audio and text—is consumed. The Buy segment offers consumer packaged goods manufacturers and retailers the industry’s only global view of retail performance measurement. By integrating information from its Watch and Buy segments and other data sources, Nielsen provides its clients with both world-class measurement as well as analytics that help improve performance. Nielsen, an S&P 500 company, has operations in over 100 countries that cover more than 90 percent of the world’s population. For more information, visit www.nielsen.com.

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