Consumers in Philippines, Thailand and Vietnam are feeling confident, but Singaporeans and Malaysians not so much, according to the Nielsen Global Survey of Consumer Confidence and Spending Intentions.
Through 2016, the Philippines confidence index rose from 119 to 132, the highest increase recorded among the Southeast Asian markets studied. Thailand came in at second place with a five-point increase from 105 to 110, followed by Vietnam which had a three-point increment.
Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism, respectively. Singapore and Malaysia were exceptions in Southeast Asia with confidence levels below 100. The confidence indicators studied include immediate spending intention, confidence in local job prospects and sentiment about personal finances. All three indicators showed increases compared to the beginning of the year across the region.
Stuart Jamieson, managing director of Nielsen in the Philippines and emerging markets-Southeast Asia Cluster attributed the improved scores in markets that performed well to local conditions, as well as the festive periods in the last quarter. Vietnam and Philippines recorded a robust GDP growth of 6.7 percent and 6.6 percent, respectively, in the last quarter of 2016.
In terms of specific confidence indicators, Philippines had the highest increase in spending intention (eight percentage points to 60 percent) and job optimism (15 percentage points to 87 percent) across the region. The populous nation recorded a five-point point increase in optimism on personal finance, to 86 percent.
Speaking to Campaign Asia-Pacific, Jamieson said the Philippines' strong performance in all three indicators can be explained by its economy's reliance on consumption rather than government spending. Sales of consumer goods grew at a rate of 7.8 percent last year compared to the same period in 2015.
"The continued bullishness of consumers is good news for retailers and consumer-packaged-goods manufacturers because consumers are more willing to spend—and that means half of the battle is won," said Jamieson. He added, however, that optimistic consumers present a challenge for brands as they have to work harder to engage them.
"Now that they are optimistic and have the willingness to spend, they are more open to experimenting or trying new products or aspirational products," he said. "That would mean that they would start looking or trying new brands or upgrading the lifestyle."
On the other hand, Jamieson advised brands to think about their communication strategies in Philippines. "Today’s consumers in the Philippines are young, with the median age being 23 years old, highly optimistic, digitally connected and aspirational," Jamieson said. "As a brand, how can your message be relevant to this new breed of consumers?"
Meanwhile, the positive growth in Thailand's consumer confidence in Q4 can be explained by the tax deduction policy introduced by the government during the end of last year, said Somwalee Limrachtamorn, managing director of Nielsen Thailand.
"Key seasons like Christmas and New Year would normally uplift sales and growth in the large trading format as well as consumer spending and mood in Thailand," Somwalee said. "Additionally, the government’s long-term strategy for exports, aiming at improving Thailand’s export competitiveness, also takes into account."
Somwalee noted that the growth recorded in Q4 last year was less than in 2015 due to the passing of the Thai king in October. The national tragedy affected consumer sentiment and led to manufacturers delaying several new product launches.
For Thai consumers, Somwalee advised businesses and brands to focus on target marketing—putting their brands on the top of consumers' mind.
"We can see that even the household debt is high, Thai people are still able to afford premium products if product positioning, branding, and product benefits and values are strong," said Somwalee. "Establishing the unique and strong position in consumer’s minds and hearts by understanding them and giving them reasons to believe is key."
Caution with money
The Nielsen Global Survey of Consumer Confidence and Spending Intentions also noted that consumers from the region were among the world's most keen savers, with 68 percent planning to channel their spare cash into savings, compared with 50 percent globally.
Confidence for personal finances rose two percentage points in the region, with Thailand showing the biggest improvement of seven percentage points, reaching 65 percent. Both Philippines and Vietnam also recorded an increase in this aspect, at five percentage points and two percentage points, respectively.
“Southeast Asians are careful in their spending because of their predisposition to prioritise saving over spending,” said Stuart Jamieson, managing director of Nielsen in the Philippines and emerging markets, Southeast Asia Cluster. "On the other hand, their rising disposable income is driving the desire to seek out lifestyle upgrades.”