Overall consumer confidence has dropped in Hong Kong, mainland China and Macau compared to the previous quarter, according to a recent survey conducted by City University of Hong Kong (CityU), while confidence in Taiwan rose. It was also revealed that consumers had the weakest confidence in prices.

CityU announced on 14 January the fourth quarter results of the Chinese Consumer Confidence Index for 2010.

The results revealed that consumer confidence in Hong Kong declined by 1.3% on the previous quarter, with mainland China and Macau down by 1.7% and 3.9%, respectively. The highest confidence score, 92.6, was achieved by mainland China, while Macau placed second (84.7), followed by Hong Kong (83.8) and Taiwan (76.6).

Dr Geoffrey Tso Kwok-fai, Associate Head and Associate Professor in CityU’s Department of Management Sciences, is responsible for compiling the Hong Kong index. He said, “As the economy picked up, consumers reported confidence in the prospect of economic development and employment. However, they showed a lack of confidence in spending-related categories such as consumer prices and living standards. In addition, consumers in Hong Kong and mainland China were cautious about stocks. As a result, the overall confidence index has dropped.

Dr Tso said the overall consumer index for Hong Kong, mainland China, Macau and Taiwan has stayed below 100 throughout 2010, indicating a slight lack of confidence across the Greater China region. The index uses a scale of 200 (complete confidence) to represent ascending levels of consumer confidence. Scores below 100 suggest people lack confidence while scores above 100 reflect relative confidence.

The index covers six categories: economic development, employment, consumer prices, living standards, housing purchases and stock investment. It serves as an indicator of spending intentions over a particular period by examining consumer perceptions about current and anticipated social and economic conditions.

In general, confidence in consumer prices in the Greater China region fell. Mainland China (63.9), Macau (51.2) and Hong Kong (49.7) reported record low scores in this category for 2010. A decrease of 13.3% gave Hong Kong its lowest score since 2009.

Dr Tso said Hong Kong and Macau are suffering from imported inflation because of high inflation in mainland China and the rising strength of the renminbi, given the fact that most food and daily items are imported from mainland China. Subsequently, consumer confidence in both places had ebbed.

Dr Tso pointed out that Hong Kong achieved a lower score than Macau in the index for two consecutive quarters and that Hong Kong’s confidence index has dropped for five consecutive quarters.

Hong Kong consumers had the weakest confidence in prices and housing purchases. Although the score in the latter category went up by 13.9% against the previous quarter, it was only 60.8, which represented an overall lack of confidence. The score of 102.5 in living standards showed Hong Kong residents were most confident in this category, yet it still fell by 3% when compared with the previous quarter.

Dr Tso further pointed out that local young people are more optimistic about spending, as the younger the respondents are, the higher the overall index score is. The survey also revealed a correlation between consumer confidence and individual spending power, as the higher the individual and family income, the higher the overall consumer confidence score.

The index is compiled by six universities in four places in the Greater China region: CityU in Hong Kong; Capital University of Economics and Business, Central University of Finance and Economics, and Renmin University in mainland China; Fu Jen Catholic University in Taiwan; and Macau University of Science and Technology in Macau.

CityU is responsible for the research in Hong Kong based on a quarterly interview with about 1,000 residents aged 18 or above who live in the territory most of the time. The 2010 fourth quarter survey was conducted from 17 to 26 December.