Is the global recession bottoming out?

Articles
April 30, 2009

Is the global recession bottoming out?

The recession that has gripped the world has so many elements behind it that finding a bottom seems near impossible. Monetary decisions agreed to at the recent G-20 Summit might work and they might not, but leaders of the free world have dwindling options to revive their economies. Meanwhile, affected consumers watch and hope as their retirements slip further away, jobs disappear, and daily expenses grow tougher to manage. All of this happening in many countries—witness the riots in France. And yet, perhaps out of hope rather than reason, consumer confidence measures taken by Nielsen in 11 major GDP (Gross Domestic Product) countries suggest a possible bottoming out. “Consumers worldwide appear to be in a holding pattern and we see evidence that consumer spending might be positioned to turn around,” said James Russo, vice president-global consumer insights at Nielsen. “There is no doubt that conditions remain tough for global consumers, with continuing widespread areas of weakness, but levels of decline seem to be moderating.” Figures from the latest Nielsen Economic Current scorecard (February 2009) showed a pickup in economic activity only in Germany, among the eleven nations. The scorecard was launched in late-2008 to provide a quick assessment of which top-GDP countries are growing or declining. It examines eight key measures: market value, market volume, move to store brands, shift to value channels, retailers’ use of promotions, frequency of shopping trips, spending per trip, and consumer confidence.

The recession that has gripped the world has so many elements behind it that finding a bottom seems near impossible. Monetary decisions agreed to at the recent G-20 Summit might work and they might not, but leaders of the free world have dwindling options to revive their economies.

Meanwhile, affected consumers watch and hope as their retirements slip further away, jobs disappear, and daily expenses grow tougher to manage.

All of this happening in many countries—witness the riots in France. And yet, perhaps out of hope rather than reason, consumer confidence measures taken by Nielsen in 11 major GDP (Gross Domestic Product) countries suggest a possible bottoming out.

“Consumers worldwide appear to be in a holding pattern and we see evidence that consumer spending might be positioned to turn around,” said James Russo, vice president-global consumer insights at Nielsen. “There is no doubt that conditions remain tough for global consumers, with continuing widespread areas of weakness, but levels of decline seem to be moderating.”

Figures from the latest Nielsen Economic Current scorecard (February 2009) showed a pickup in economic activity only in Germany, among the eleven nations.  The scorecard was launched in late-2008 to provide a quick assessment of which top-GDP countries are growing or declining. It examines eight key measures: market value, market volume, move to store brands, shift to value channels, retailers’ use of promotions, frequency of shopping trips, spending per trip, and consumer confidence.

On the scorecard’s one-to-five scale of economic performance, where one represents strong growth (above 5%) and two represents more moderate growth (between 1% and 4%), India and China were the only nations to score ‘one,’ Canada and Russia scored ‘two,’ and the United States scored ‘four.’

The scorecard further showed that:
•    People are buying more store brands, especially in Spain, Germany and Canada.
•    They are also switching to cheaper grocery brands and cutting back on other discretionary expenses.
•    Shoppers are shifting to value channels that operate on lower margins, including in markets such as Brazil, Russia, India and China.

Such scrimping reflects consumers’ persistent gloomy perception of the economy
in many parts of the world. The mood is darkest in Western countries, according to results of the latest twice-a-year Nielsen Global Consumer Confidence Index: 
•    Less than 1 consumer in 4 in the UK, Canada, U.S., Spain, France, Italy and Germany believes their country will shake the recession within 12 months.
•    By contrast, 56% of consumers in India feel this way.
•    Only 35% of consumers in China think their nation is even in a recession.

These differing views aside, “there are a lot of similarities among consumers spending globally. No matter the border, consumers are reining in their spending,” said Jonathan Banks, business insight director for Nielsen in Europe. “This month’s NEC shows much of consumers’ spending continues to revolve around essential food and consumable items….In this volatile market, retailers and manufacturers need to know how to maximize their public exposure, and how to understand the needs of consumers at a granular level, in order to survive.”