Blog Fleetowner Com Trucks At Work Wp Content Uploads 2011 11 Greece Flag thumbnail
Blog Fleetowner Com Trucks At Work Wp Content Uploads 2011 11 Greece Flag thumbnail
Blog Fleetowner Com Trucks At Work Wp Content Uploads 2011 11 Greece Flag thumbnail
Blog Fleetowner Com Trucks At Work Wp Content Uploads 2011 11 Greece Flag thumbnail
Blog Fleetowner Com Trucks At Work Wp Content Uploads 2011 11 Greece Flag thumbnail

Up, down … and all around

Nov. 1, 2011

A recessionary mindset is growing among consumers as more than half say they are currently in a recession—up four percentage points from last quarter and seven points from the start of the year. The result is continued spending restraint for discretionary expenses, which is expected to continue into the next year.” –Dr. Venkatesh Bala, chief economist for the Cambridge Group, a division of Nielsen Holdings

It’s no secret that everyone’s on edge these days about the economic direction not only of the U.S. but of the world as a whole.

Take for example the ongoing drama concerning the European bailout efforts on behalf of Greece. One minute, it seems a deal is reached to provide Greece with the necessary funds to keep functioning in return for steep cuts to government employment and spending. The very next, Greece’s prime minister announces a referendum vote on whether such a deal should be accepted.

Needless to say, the back-and-forth, topsy-turvy nature of just the Greek issue alone is creating all sorts of negative waves for the world and the U.S., too – especially ones that could affect the freight market.

According to global survey firm Nielsen Holdings, which tracks consumer attitudes worldwide, the Greek issue along with other poor economic indicators is torpedoing consumer confidence – convincing many to retrench in terms of spending. Such a retrenchment, of course, would result in a reduction of freight demand – not what truckers were hoping for, nor what recent data indicated could happen.

Nielsen said global online consumer confidence fell in the third quarter – the seventh consecutive quarter the firm registered such a decline – dropping in 31 of 56 global markets it measured.

“The third quarter was volatile and challenging for global economies and financial markets amid stagnant U.S. unemployment figures and a worsening euro zone debt crisis,” said Dr. Venkatesh Bala, Chief Economist at the Cambridge Group, a division of Nielsen.

In the latest round of the survey, conducted between August 30 and September 16, 2011, the majority of respondents (64%) agree that now is not a good time to buy the things they want and need, with one-in-five Europeans and one-in-three North Americans reporting they have no spare cash. In sum, the outlook for consumers in these regions is more pessimistic now than it was at the height of the 2009 recession, Nielsen's data indicates.

Among North American and European respondents who believe they are in a recession, roughly 60% believe it will continue into the next year, Nielsen reported.

The firm also noted that the economy re-emerged as the top concern among 18% of online consumers polled across the globe. The economy last topped concerns in the fourth quarter of 2010, before it was replaced by worries over increasing food prices in the first half of this year.

“Driven by a stalled job market and uncertainty about the future course of the global economy, concerns over job security and other economic risks rise to new heights in the third quarter in many parts of the world,” said Bala.” In North America, one-in-three are concerned about the economy—up seven points from second quarter and more than one-in-10 (12%) are worried about job security—an increase of five points from three months ago.”

In Latin America, concerns over job security (15%) and crime (12%) took a slight edge over the economy (11%). In Middle East/Africa, while job security retained the top spot in this region, the quarter-on-quarter increase is noteworthy—jumping nine points to 20% and up from 11% in the second quarter. In Asia Pacific, the economy (18%) and job security (15%) rose eight and seven points, respectively.

Now, here’s an interesting point. For the first time, Nielsen asked global respondents how they allocate their monthly budget and where they would increase or decrease spending if their budget expanded or contracted by 10%.

“The results are very revealing,” Bala noted. “Overwhelmingly, there is a sense of weariness and pent-up desire for a respite; when households contemplate a 10% increase in budget, we see a desire to expand allocation to indulgent categories like ‘pleasure travel/vacations’ (+29%) and ‘recreation and entertainment’ (+20%). There is also a sense of economic uncertainty and a need for a safety net, so consumers also add to their ‘savings/investments’ (+25%).”

On the flip side, when budgets are reduced by 10%, discretionary spend—especially in the areas of ‘apparel’ (-21%) and 'dining out’ (-18%)—are reduced. Consumers also indicated a spending cut back on ‘electronics and appliances’ (-14%). “If the global economic climate worsens, these three sectors appear to be particularly vulnerable,” Bala said.

In the event of having to make do with a smaller budget, respondents also indicated a reduction in savings/investment by 10%. “The asymmetry with expansion suggests that while respondents would like to preserve or add to their savings and investments, they also recognize that they may be bumping up against harder economic realities,” he added.

U.S. consumer confidence dropped one point to an index of 77. “With high gas prices, food inflation, bad weather, distressed housing market, troubling government debt, weakening financial markets, and little improvement in the job market, U.S. consumer confidence dropped in the second and third quarters of 2011,” said Todd Hale, senior vp- consumer & shopper insights for Nielsen’s U.S. division.

“Unlike some other countries around the globe, U.S. consumer confidence has not shown improvement,” he stressed. “This pattern of continued low confidence paints a picture of a slow and moderate economic recovery.”

Of course, European consumers remain among the most pessimistic. “Across the euro zone, the looming debt crisis and extreme volatility of financial markets is driving consumer confidence levels down, particularly in Portugal (40), Ireland (64), Greece (51) and Spain (56), each reporting consumer confidence index scores well below the European average of 74,” Cambridge’s Bala pointed out.

Several markets posted double-digit confidence declines last quarter with the largest decrease from France, dropping 13 index points to 56, he added.

What all of these data points seem to indicate is that everyone – especially consumers – remains on edge; overshadowing to some degree a number of positive trends out there, such as the 2.5% jump in third quarter U.S. gross domestic product (GDP).

It also reinforces in large measure the decision by many trucking companies not to expand their operations; to keep current capacity levels steady, replacing older equipment with new iron only as cash permits.

Tighten the belts, then, for the rocky ride continues.

About the Author

Sean Kilcarr 1 | Senior Editor

Sponsored Recommendations

Tackling the Tech Shortage: Lessons in Recruiting Talent and Reducing Turnover

Discover innovative strategies for recruiting and retaining tech talent in the trucking industry at our April 16th webinar, where experts will share insights on competitive pay...

Stop Sweating Temperature Excursions

Advanced chemical indicators give you the peace of mind that comes from reliable insights into your supply chains. Compromised shipments can be identified the moment they arrive...

Stop Sweating Temperature Excursions

Advanced chemical indicators give you the peace of mind that comes from reliable insights into your supply chains. Compromised shipments can be identified the moment they arrive...

How Electric Vehicles Help You Prolong the Life of Your Fleet

Before adopting electric vehicles for commercial/government fleets, prioritize cost inquiries. Maintenance is essential; understand the upkeep of EV fleets. Here’s what you need...

Voice your opinion!

To join the conversation, and become an exclusive member of FleetOwner, create an account today!