Consumer confidence hitting record high, but with hangovers left from pandemic
Global consumer confidence soared to record heights in the first quarter of 2021, according to The Conference Board: Global Consumer Confidence Survey, as vaccination campaigns broadened, travel restrictions loosened, and governments and central banks continued to provide robust economic stimulus.
These factors are contributing to various geographic regions returning to a “state of normalcy sooner” including increased spending across the spectrum, but some economic hangovers persist from the global pandemic crisis.
The Conference Board is a member-driven think tank that has delivered economic insights since 1916. It released this recent global consumer confidence survey on Wednesday. Their methodology for what is comparably a business cycle index is based on a point system where a figure above 100 is considered positive, or below 100 representing decline. This survey also employs opinion polling which is expressed as percentages.
“The lightening of consumer moods globally bodes well for spending throughout the remainder of the year as economies continue to emerge from the 2020 pandemic-induced economic downturn and work toward arresting the spread of the virus,” said Dana Peterson, Chief Economist of The Conference Board.
“Nonetheless, the global economic recovery – and, consequently, consumer sentiment – is likely to continue to vary notably from region to region. Economies with greater access to vaccines are likely to achieve herd immunity, and thus will return to a state of normalcy sooner,” Peterson added.
The survey found that overall global consumer confidence shot up from 98 in the fourth quarter of 2020 to 108 points in the first quarter of 2021. That figure exceeded the reading of 106 registered in pre-pandemic 2020 Q1. Reminder, a figure above 100 is considered positive and the 108-point score is the highest recorded since the survey began in 2005.
Confidence rose in 49 of 65 markets surveyed, as economic activity resumed, COVID-19 cases peaked in many economies, and vaccine development and distribution expanded.
The vaccines contributed to that revival, so individual economies’ level of access to them will greatly affect the timing of their recoveries and boosts in consumer confidence. (For 2020 Q4 indexes, results exclude China due to data collection constraints.)
Confidence still varied across regions: Latin America (up 13 points, from 86 to 99) and Europe (up 11 points, from 76 to 87) enjoyed the biggest gains in consumer confidence. But both regions started from low bases, and Europe remains the least confident region. North America, by contrast, slipped six points, from 116 to 110, while Africa and the Middle East dropped from 101 to 97.
Growing confidence in personal finances, especially, propelled the stronger global sentiment: Consumers were significantly more optimistic about their finances in Q1 2021, with the gap between positive and negative responses standing at +29 percentage points, up substantially from +15 percentage points in Q4 2020.
Of the three key drivers of global confidence, personal finances made the largest impact, although the other two drivers also trended upward: Sentiment about job prospects were up overall around the globe and spending intentions flipped from negative (-7 ppts) in Q4 2020 to positive (+6 ppts) in Q1 2021.
Consumers are gearing up for a return to normalcy: Consumers spent more on entertainment outside of the home, clothing, and vacations. Taken together, these trends indicate that consumers are increasingly looking forward to returning to normal activities at some point this year.
Given that consumption levels significantly contribute to growth in many mature economies, such activity in anticipation of greater freedom later on supports The Conference Board’s upwardly revised projection of 5 percent real GDP growth globally this year.
However, around the world, consumers also ramped up their protective savings: 57 percent of global consumers indicated that they are putting money into savings, an increase of 9 ppts from the previous quarter. Their efforts to economize primarily reflected savings on hospitality and entertainment services.
Consumers planned to eliminate annual vacations, delay upgrading technology, and cut meals away from home. They also switched to cheaper grocery brands and drove their cars less.
The scars of the recession lingered, with health and economic concerns still looming large.
The world is not quite buzzing yet.
A strong majority of consumers (64 percent) said that their market was still in recession during the first quarter of 2021. While that figure dropped sharply from the end of 2020 (down 17 percentage points, from 81 percent) recession concerns remained elevated.
Globally, only 41 percent of consumers expected that their economy would be out of recession in 12 months, virtually unchanged from the previous quarter.
Consumers’ worries about their own health (22 percent) and economic performance (20 percent) dominated their top concerns. This trend will likely hold through mid-2021 given the continued crisis, and the time it will take to arrest the coronavirus and establish herd immunity.
“With uncertainty around jobs and health prompting consumers to continue economizing, it seems clear that GDP returning to pre-pandemic levels will not in itself mark a return to the old normal,” said board chief economist Peterson. “Healing in labor markets may take longer, with greater potential for scarring among industries that are vulnerable to automation and digital transformation.”
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