View Full Version : Emerging market consumers hurting with rest of world

12-23-2008, 07:37 AM
Tue Dec 23, 2008 5:31am EST

By Michelle Nichols

NEW YORK (Reuters) - The financial crisis is shattering global confidence, with three quarters of households cutting spending and consumers in emerging countries feeling especially squeezed, a survey showed on Tuesday.

While countries like China, India and Russia have helped fuel world growth in recent years, the survey of 22 states in November found consumer optimism in such emerging economic powers in "precipitous decline."

"There's a lot of doubt right now where growth is going to come from," Clifford Young of Ipsos Global Public Affairs, the international market research and polling company that carried out the online survey told Reuters in a telephone interview.

He said the survey, which included a whole range of rich, and emerging states, "put in check a lot of strategies of global companies that were banking on emerging markets. In addition it puts in check any notion of 'decoupling.'"

Despite boasting a year ago that they were "decoupled" from the problems gripping developed markets, emerging stock markets are hovering near their lowest point in four years.

What started as a meltdown in the U.S. market for high-risk mortgages has engulfed the world, freezing access to credit, sparking bank collapses and requiring the bailout of whole industries and some entire countries.

"We expected things to be bad but it's most striking in the two big emerging markets India and China," Young said of the poll. "It's not good news in the short to medium term."

The poll found that global consumer optimism had nearly halved. Only 31 percent described the economic situation as very good or somewhat good in November compared with 55 percent who said the same thing in April 2007.

The largest falls in optimism, using this method, were in China, which plunged to 46 percent from 90 percent 18 months ago, and India, which dropped to 65 percent from 88 percent.

Many leading emerging markets export commodities. Flush with cash from soaring prices until six months ago, domestic demand helped to underpin growth. But now, the lag effect of falling demand and prices for oil, grains and industrial metals is being felt in these nations too.


Young said the survey reflected the effect of crude oil hitting a record high of more than $147 a barrel in July -- it has since dropped to below $40 a barrel -- and the psychological impact of the spreading crisis.

"But we're not seeing the actual effect of the financial crisis yet," Young said.

Brazil's consumer optimism rose to 61 percent from 42 percent in April 2007, but Young said that confidence in Latin America's largest economy was unlikely to last and was expected to decline in the next six months.

"It's really hard to fall much further in some of the countries," he said. "In the developed countries there will be a leveling out. I think we're going to see further declines in the emerging markets -- there's fat there to burn off."

Ipsos surveyed people in the United States, Canada, Brazil, Mexico, Argentina, South Korea, China, Japan, Britain, Spain, Australia, Russia, India, Czech Republic, Poland, Turkey, Sweden, the Netherlands, Belgium, Germany, France and Italy.

The 22 countries make up 75 percent of the world's gross domestic product.

The survey showed 72 percent of people were cutting household spending. The first thing to go for 76 percent of families was expenditure on entertainment, like movies and music, followed by vacations (73 percent), luxury items (72 percent) and clothing (59 percent).

People in most countries said the situation had worsened in terms of the cost of food, gas prices, local currency, job losses, inflation, access to credit, utility prices, home prices and the cost of buying a vehicle.

The survey can be seen at www.ipsos-na.com/news.

(Additional reporting by Daniel Bases; Editing by David Storey)