How important is consumer confidence to your business? It is very important of course if you produce consumer goods that are luxury or non-essential. Consumers in the countries you sell in need to be confident in their jobs, the economy, and their life if they are going to purchase something they do not have to buy. Even every day staples can also be affected by consumer confidence. Negative consumer confidence may lead some consumers to consolidate daily needed items or to buy them less frequently.

Consumer confidence in each country can have different meanings for your business.

Spending by consumers makes up 70% of the United States economy, but it is only estimated to be 34% in China. Consumer confidence readings matter more in the United States then in China because a drop in consumer confidence in the United States can undo the economy if consumers cut their spending severely. The United States steep fall and slow recovery from the Global Financial Crisis can be traced to consumer spending and consumer confidence. In China, infrastructure investment like the massive build out of high speed train service accounts for a much larger slice of GDP. Still, 34% does matter.

There may not be too many surprises in looking at recent global consumer confidence readings. The Global average for Q1 2011 is a slightly pessimistic 92, a reading above 100 is optimistic while a reading under 100 indicates pessimism. The Asian/Pacific and Middle East regions are optimistic. Not surprising the United States (slow economic recovery) and Europe (Debt Crisis) are pessimistic with Europe dropping as the Debt Crisis has intensified. The one surprise may be the Latin America region dropping from 100 to 90 placing it under the United States. Another interesting point is that the United States trend line matches the Global trend line almost perfectly, although with lower readings. Does United States consumer confidence need to move above or close to 100 for the Global average to? Possibly, with 70% of a $14 trillion economy driven by consumers.

Asian and Middle Eastern countries dominate the most optimistic list while European countries dominate the most pessimistic list.

Switzerland is the only top optimistic country from Europe while South Korea is the only non European country in the most pessimistic list. Why? Switzerland has its own currency and does not use the Euro, which is under pressure from the Debt Crisis. The South Korean Won is trading near three year highs making South Korean exports more expensive in the export driven country.



Will consumer confidence in Europe, the United States, and Latin America improve?

Europe needs to likely get past the Debt Crisis that threatens the Euro currency in order for optimism to rise. The United States government is fighting over raising its debt limit and will default on its massive debt if not raised by the end of July. Consumer confidence in the United States is likely to follow which way that decision goes. Latin America was riding the 100 base line recently so, this bit of pessimism may be temporary. The Asia Pacific region in yet another set of data again looks like the place to sell your products, along with the Middle East this time.



By: Matt Flax - Senior Business Advisor at DragonGate.Asia