Demand for new homes, cars hit hardest: survey

PUBLISHED : Saturday, 17 January, 2009, 12:00am
UPDATED : Saturday, 17 January, 2009, 12:00am

Consumer confidence in major cities on the mainland has been hit hard by worries about the economy, according to a survey released yesterday.

The demand for cars and new homes has suffered the most, but consumers are also cutting back on non-essential items such as branded fashion goods, entertainment and their grocery shopping.

'Behaviour is changing. People are looking for value for money rather than luxuries,' said Sam Mulligan, director of the DDMA market research firm, which conducted the survey. 'These are areas where people are going to cut back.'

The study surveyed about 500 middle-income earners aged 25 to 45 in five cities: Guangzhou; Beijing; Shanghai; Shenyang , Liaoning province ; and Chengdu in Sichuan .

Although consumer confidence was generally low across all regions, Guangzhou residents were found to be the most pessimistic. Beijing consumers were relatively unworried.

However, Guangzhou respondents tended to be more positive about the longer-term prospects, with 47 per cent expecting to be in a better financial position at the end of this year. 'They may feel they have been through the worst of times already and things are bound to get better,' Mr Mulligan said.

The poll was an initial benchmark survey to lay the foundations for a monthly tracking study of consumer trends in the five cities.

The company also ran two follow-up surveys, of 1,000 respondents each, asking people whether they planned to cut down on entertainment or food shopping, and how they were altering their spending.

The company released key findings of the study yesterday, and its full report will follow next week. Mr Mulligan said the survey had important implications for mainland retailers in the run-up to the Lunar New Year.

'We have to be very careful when we look at numbers,' he said. 'Recent figures in the US showed consumer spending in December dropped by 3 per cent, which was actually a lot less of a drop than most people thought it would be. But underlying that is what the retailers had to do ... They had to discount extremely aggressively and cut right into their margins. What they were doing was churning cash instead of making money.'

Retailers in Shanghai were already seen employing similar tactics.

'They will get money in the end, but their margins will be considerably lower,' Mr Mulligan said.