The Consumer that would be King

Hong Kong is famous the world over for its buoyant free market, active stock exchange, and keenly priced goods. People are drawn here to its shopping malls, computer centres, and street markets. It is a place where a generally light regulatory touch inspires trust, while the market is free enough to express itself: a place where the consumer would be king…

But consumer confidence is a fragile commodity and the Hong Kong market, along with others around the world, has endured some severe knocks within recent memory. Sentiment changed quickly at the time of the 1997 Asian financial crisis, the 2003 SARS outbreak, and the 2008-9 economic crisis.

Consumer confidence is a significant economic indicator which measures the degree of optimism that consumers feel about the state of the economy, as well as their personal financial situation. Over the past seven years or so the Hong Kong Consumer Confidence Index has carved out a niche for itself as a trusted objective measure of how people feel about their current and anticipated social and economic conditions in the region.

The Hong Kong Consumer Cofidence Index 2008-2014

"The index reveals how confident people are feeling about various aspects of their lives. We look at attitudes to prices, housing, stocks, and employment, and so on, and we find that the data has got stories to tell," says Professor Geoffrey Tso, Associate Head of the Department of Management Sciences.

The Consumer Confidence Index generally follows economic development. It goes up when the economy booms, and down when it contracts. For instance, after 2009 there was a dramatic drop in confidence revealing the anxiety felt by Hong Kong people. Consumer confidence only began to make what looks to be a sustained recovery in 2013.

Researchers at the Statistical Consulting Unit in the Department of Management Sciences put standardised questions to Hong Kong consumers about spending intentions and confidence levels in six areas: economic development, employment, consumer prices, living standards, housing sales and stock investment.

These sub indices tell their own stories. Results show that Hong Kong citizens are pessimistic about their ability to buy real estate, reflecting perhaps the current high prices and the difficulty for the younger generation in getting on the housing ladder. Confidence in housing purchases has declined from 85 in the first quarter of 2009 to 58 in 2014. Bear in mind that on this scale zero means that a person has no confidence, 100 that they feel neutral, and 200 that they have complete confidence. General price rises since 2009 have also taken their toll. Commodity prices are seen in a deeply negative light, confidence declining from 84 to 57 in the same period.

The Consumer Confidence Index team release data on a quarterly basis and a series of press releases summarise the latest trends in the areas of employment and living standards.

"This is very much an applied research project and there is significant interest from the public. We've found that regular press releases and conferences are the best way of highlighting the latest information and the media often picks up on stories in the data."

"There are many stakeholders in the regional economy. The index presents information that enables the government, industries and citizens to set their own priorities and make timely adjustments," Dr Tso added.

The quarterly confidence index is part of a regional CityU-Chinese Consumer Confidence Index providing data that can be compared to countries in Europe and the US as well as regionally with Macau, Taiwan and the mainland. Data is compiled by five universities in the Greater China Region, which includes Hong Kong. For its part since the third quarter of 2008, the Statistical Consulting Unit has been conducting about 1,000 computer-assisted telephone interviews each quarter with Hong Kong citizens aged between their early 20s and late 50s.

So how confident are we in 2014? The latest data reveals that the overall index for the first quarter 2014 stood at 84 points out of 200.

The readings for the sub indices continue to show Hongkongers'

  • deep pessimism towards commodity prices (57) and housing purchases (58)
  • pessimism towards economic development (93), and stock investment (84), and
  • relatively neutral outlook towards employment (106), and living standards (107)

On a more optimistic note, the overall index is up nearly 4 per cent over the last year.

More on the Hong Kong Consumer Confidence Index (HKCCI): http://www6.cityu.edu.hk/betterworld/project-00001.htm