Confidence in local economy and job prospects below standard for first time

Confidence in employment has also suffered a significant drop

Consumer confidence in the local economy fell below the general standard for the first time since the 2008 global financial crisis in the most recent quarter, according to the latest survey conducted by the Macau University­
of Science and Technology (MUST). Meanwhile, locals’ confidence in employment also suffered a significant drop from its previous high level.
The survey, reflecting individual consumers’ current perceptions and the next quarter’s spending expectations, shows that residents’ confidence in the local economy, employment and stock investment has dropped, consequently leading to an overall decline in the city’s consumer confidence index last quarter.
Consumer confidence in the local economy dropped most substantially, from above to below the benchmark of 100 points. Compared to the figure from one year ago (114.63 points),
this particular sub-index has declined by 13.33 percent to stand at 99.35 points, also representing a 8.53 percent drop from the previous quarter (108.61 points).
Scholars in charge of the survey suggested that the reversal in confidence, ending 22 consecutive quarters of consumers “having confidence,” was the public’s psychological response to the continuous gaming revenue plunge and a negative GDP growth.
“This shows that Macau consumers became relatively pessimistic, as opposed to the previous cautiously optimistic feeling about the local economy’s overall performance,” said professor Chan Lai Kow, director of the MUST’s Institute for Sustainable Development, at a press conference yesterday.
Meanwhile, employment – the highest-scoring indicator of confidence as usual – declined by 8.4 percent over the course of the last year to stand at 116.94 points, down by 6.36 percent from the previous quarter (124.88 points). Despite the new resort projects creating more jobs, local residents’ optimistic attitude towards the labor market has substantially weakened. This is because the major workforce, who work in gaming and related industries, is now worried about the local economy’s prospects, explained the survey’s coordinator, Antony Chu.
These two major changes caused Macau consumers’ overall confidence to decline from 87.35 points by 2.22 percent quarter-on-quarter to stand at 85.41 points, which is also 0.67 percent lower than the confidence level in the first quarter of 2014 (85.99 points).
Regarding residents’ worries and lack of confidence, the scholars suggested that consumer confidence in the economy and employment is likely to remain in a downward trend for the remaining quarters this year. This is because “there is a consensus that Macau’s gaming revenue has little chance of rebounding soon.” “This is really the time to diversify the economy. We’ve been talking about diversification for years but we haven’t really done much,” stressed Professor Chan.
The public’s confidence in stock investment stopped rising in the first quarter, and decreased by 2.03 percent quarter-on-quarter to 87.46 points. This reflects a considerable drop in local consumers’ willingness to invest in the volatile stock market.
Moreover, the survey also shows lower local consumer confidence in purchasing household appliances and cars, which respectively recorded 4.08-percent and 2.49-percent drops quarter-on-quarter to stand at 94.52 and 73.06 points.
The survey collected 1,007 valid responses from local residents above the age of 18 from March 16 to 25, via computer-­assisted telephone interviews.
A consistent trend evident throughout all 26 quarterly surveys is for recipients with a higher level of education to possess higher confidence in consumption. Accordingly, the scholars stressed that the city needs to focus more on education and training, as well as encouraging continuous learning and youth entrepreneurship.

Inflation expected to go down

The scholars recognized that a drop in visitors’ consumption in local retail stores has also seen an ease in demand for commodity goods, a change which is reflected in the notable rise in residents’ confidence in commodity prices. Over the previous quarter (59.66 points), this particular sub-index surged by 11.53 percent to 66.54 points, which is 20.92 percent higher when compared with that of a year ago.
“The actual inflation hasn’t been eased, and people’s current perception went down by 2.8 percent. Nevertheless, they felt [the inflation rate] would drop in the future, as the news reports were all over the place about the Chinese economy’s slowdown and deflation,” said professor Chan, adding that this indicator’s rapid rise in recorded confidence also implies a risk of approaching deflation.
Consistent with an increasing confidence in commodity prices, residents’ perceptions of living standards have remained stable and showed a slight increase in the year’s first quarter. The indicator went up by 0.29 percent to 96.19 points compared with that of 2014’s final quarter (95.91 points), indicating that the pressure that inflation has placed on consumers has been further alleviated.
Another sub-index slightly higher than the previous quarter is the one recording confidence in property purchases, which rose by 0.35 percent.