January 27, 2013
New MasterCard Report investigates the potential resilience of markets in a slower growing economy
New Zealand, January 27, 2013 – New Zealand consumer confidence is closely tied to export growth making it ‘relatively vulnerable’ to a slow-down in global economic growth, according to a new report released today by MasterCard Worldwide. The report assesses the extent to which a slower growing global economy – and specifically a slowdown in merchandise exports – will impact the resiliency of consumer confidence.
The report – “Consumer Confidence in a Weak Global Economy: An Index of Resilience, 1Q, 2013” – is based on a correlation analysis of the MasterCard Worldwide Index of Consumer Confidence against merchandise export growth for 17 countries across Asia/Pacific and the Middle East.
Markets with the strongest potential to weather the economic downturn are those with the highest level of consumer confidence, as well as most resilient to a slowdown in merchandise exports. At the opposite end of the spectrum are markets with least potential, which are those with very low consumer confidence, and are also most vulnerable to a slowdown in merchandise exports.
Of those markets surveyed, New Zealand and Australia are sitting middle of the pack ranked on the Index as “relatively vulnerable”.
“The strong growth in global demand that we saw during the decade of 2000-2010 provided a significant boost to New Zealand’s export-oriented economy, however our local economy has been slow to recover post the 2008/09 recession,” noted Albert Naffah, Country Manager for MasterCard New Zealand.
“This report highlights that for many markets across Asia/Pacific, especially the export-oriented ones like New Zealand, the outlook of a slower growing global economy will mean weaker demand for exports. So our ability to counteract weakened export demand by increasing domestic demand, especially in terms of private consumption, will be critical in supporting stronger economic growth.”
The correlation between merchandise export growth and consumer confidence is a key tenet of the report. Taking the example of Australia, it is well known that Australia’s exports of resource and commodities to China have become the single most important driver of its economy in recent years, so it is not surprising that consumer confidence in Australia is well correlated with its merchandise exports.
As together China and Australia account for around 35% of New Zealand’s merchandise exports, events in both markets would be likely to have significant direct implications for the economic prospects of New Zealand. Additionally, New Zealand may be more vulnerable to Australia in terms of a slowdown in exports as illustrated by the ratio of exports to GDP, which is higher for New Zealand (23.3%) compared to Australia (18.2%).
With external demand weakening in the current, uncertain global economy, domestic demand becomes an important factor in sustaining economic growth. The Index of Resilience also evaluated the resilience of consumer confidence – and the strength of consumer confidence to begin with – as factors that determine the potential of domestic consumption as a growth engine in a slower growing global economy.
New Zealand’s consumer confidence profile exhibits relative vulnerability in all but the regular income dimension, as summarised in Table 12 of the report. Stronger confidence levels around New Zealand’s regular income levels is likely due to its our generous social welfare support, which acts as a buffer that cushions the impact from any slowdown in merchandise exports.
Elsewhere across Asia/Pacific the report found Hong Kong, Indonesia, Thailand, Philippines, India and China to be well positioned with the strongest potential to leverage private domestic consumption to support economic growth. While Malaysia, Singapore, Vietnam, Saudi Arabia and Kuwait are relatively strong in terms of consumer confidence; they are also more vulnerable to a slowdown in merchandise exports.
For 15 of the 17 economies surveyed, exports to Asia/Pacific economies account for more than fifty percent of their total merchandise exports, and in New Zealand, this figure is 62.8%.
“The good news is that although growth is slow, we’re seeing New Zealanders changing their behaviour around debt and saving more, which tends to help boost consumer confidence” said Naffah.
“Growth will also be stimulated and supported domestically by a substantial boost from the Canterbury rebuild, low borrowing costs, and ongoing solid demand and higher prices for our primary –particularly dairy – exports. All of which will drive our economy at a local level and help boost consumer confidence, and in turn resilience in the market if the forecast global slowdown does occur and impacts on our ability to grow our exports,” he concluded.
Index of Resilience of Consumer Confidence
|Resilience Rank||Market||Correlation Coefficient||Category|
|1||Hong Kong||0.24||Relatively resilient|
|7||New Zealand||0.45||Relatively vulnerable|
|8||South Korea||0.47||Relatively vulnerable|
|11||Saudi Arabia||0.51||Very vulnerable|
The MasterCard Worldwide Index suite in Asia/Pacific, Middle East and Africa includes the long-running MasterCard Worldwide Index of Consumer Confidence, as well as the MasterCard Worldwide Index of Women’s Advancement, Online Shopping, Index of Financial Literacy, and the Index of Global Destination Cities. In addition to the Indices, MasterCard’s research properties also include a range of consumer surveys including Ethical Spending and a series on Consumer Purchasing Priorities (covering Travel, Dining & Entertainment, Education, Money Management, Luxury and General Shopping).
MasterCard also regularly releases Insights reports providing analysis of business dynamics, financial policies and regulatory activities in the Asia/Pacific, Middle East and Africa region. Over 80 Insights reports have been produced since 2004.
MasterCard has also released a series of four books on Asian consumer insights, authored by Dr. Yuwa Hedrick-Wong, Global Economic Advisor for MasterCard Worldwide and published by John Wiley & Sons.
MasterCard (NYSE: MA), www.mastercard.com, is a technology company in the global payments industry. We operate the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard’s products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone. Follow us on Twitter @MasterCardNews, join the discussion on the Cashless Conversations Blog and subscribe for the latest news.