Consumer confidence index and rising prices

Despite a marginal slowdown in growth, India still ranks second after Norway in consumer confidence and their attitude towards recession, says a survey by a global information and media consultancy.

One market’s trash is another’s treasure, Norway and India still ride the wave of economic slowdown. Global Online Consumer Survey conducted among 28,153 Internet users in 51 markets in Europe, Asia Pacific, the Americas and the Middle East.

Aside from consistently high consumer confidence, the two most optimistic nations in the world, Norway and India, share something in common: Their economies are benefiting from the by-products of economic slowdown.

India will see its employment rate rise in inverse proportion to rich nations, thanks to the country’s enthusiastic adoption of work-force optimization practices and getting more of outsourcing business.

India has established itself as a hub for outsourcing technical and support staff, as belts in the world’s leading economies tighten. India’s economy, and the confidence of its consumers, soar.

The Nielson survey says 94 percent of Norwegians and 86 percent of Indians were optimistic about their job prospects over the next year, while a staggering 93 percent Portuguese and 89 percent Japanese felt their job prospects were either not so good or downright bad.

Consumers in three of the world’s most developed economies – the US, Japan and New Zealand, have taken a serious turn in the last few months.

Not surprisingly, consumer confidence has fared badly in the US, the world’s largest economy and epicenter of the sub-prime housing and credit crises. Consumer confidence fell in 39 out of 48 countries, with New Zealand, the US and Latvia suffering the deepest declines.

No region or country has been spared the domino effect of the US sub-prime and credit crisis.

The last six months have been the most turbulent period for the global economy in several decades. When the USA had economic problems at the outset of the sub prime disaster nearly a year ago, the rest of the world quickly caught into a economy crisis web.

Consumers around the world are struggling with the same global issues that are impacting their daily lives. It’s an unfortunate pendulum.

On the one hand the world was witness to soaring global crude oil and commodity prices and rising interest rates, while on the other there was a fall in property prices, weakening labor markets and falling industrial output.

Adding to the above crisis it appears overall, it is not a good picture. Increase in household goods prices and food products are worrying citizens and governments alike.

The price rise has moved beyond commodities and fine decimal points it is now affecting goods on shop shelves. Items of daily use like soaps, shampoos, biscuits, detergents and other fast moving consumer goods (FMCGs) have gone up by 10-30 % in the II Qtr of 2008 (Apr-Jun)

That’s not all. There is further pain ahead with an additional 10% price hike being talked about by companies in the next couple of months. Higher price levels, they say, are likely to rule at least until the end of the year.

Take, for instance, leading food company Britannia which makes the popular Tiger and Good Day biscuits. Hit by a sharp increase in commodity prices, coupled with the recent fuel hike, the company claims that input costs have risen by 20%. And this has to be passed on to consumers. They have already made some (price) increases and will further correct (read increase) their prices in stages to reflect the impact.

Like Britannia, most companies are mulling over a further hike in prices. Dabur, another FMCG company, has upped the prices of its hair oils, shampoos and soaps, as also its packaged juices. In recent months, they have hiked the prices of products in key categories like hair care (both hair oils & shampoos) and oral care (toothpastes). The hikes range between 2% and 5% and have been put in place to neutralize the impact of the rise in input costs.’ In fact, the prices of certain brands of soap have risen in the range of 13-15 %. As hiking prices is a “sensitive’ ’ issue with most companies, not many are willing to share information on the matter.

Besides the prices of daily consumption items such as flour, rice and pulses are going up, edible oils and eggs are also up by over 37% and 16% respectively. And detergent (cake and powder) prices have gone up by 7-23 %.

The hike in crude prices has had its impact on all petroleum-related products. Henkel makes a host of household items such as detergents, utensil cleansers, soaps, deodorants, talcum powder and shaving cream.

Companys’ margins were under pressure due to overall inflation. Cigarette prices have also gone up by 5-8 %, although there has been no formal announcement.