As of Q3 2011, the cit­i­zens of less than 20% of the coun­tries involved in Nielsen's Global Con­sumer Con­fi­dence, Con­cerns, and Spend­ing Inten­tions Sur­vey were on aver­age con­fi­dent in their future eco­nomic con­fi­dence. Not sur­pris­ingly, Nic Colas of Con­vergEx points out, six were in Asia, the least con­fi­dent were in East­ern and Periph­eral Euro­pean nations, and fur­ther­more over­all global con­sumer con­fi­dence remains 9.3% below 2H 2006 (and 6.4% below Q4 2010) read­ings as the global econ­omy still has a long way to get its 'mojo' back. Colas points to the fact that 'con­fi­dence is an essen­tial lubri­cant of any capitalist-based sys­tem' and one of the key chal­lenges that worst hit Europe (and other regions and nations) face is cap­i­tal mar­kets that are assess­ing the long shadow of the Finan­cial Cri­sis of 2007–2008 and the ongo­ing Euro­pean sov­er­eign debt cri­sis impact on the world's Con­sumer Confidence.

Nic Colas, Con­vergEx Group: Con­fi­dence Games around the World

Sum­mary:

Today we review the Nielsen Global Con­sumer Con­fi­dence, Con­cerns and Spend­ing Inten­tions Sur­vey with an eye to com­par­ing the most recent read­ings of country-specific and regional sen­ti­ment to the 2010 data as well as that prior to the finan­cial cri­sis. While the Street doesn’t often focus on this par­tic­u­lar dataset, its com­bi­na­tion of breadth (50+ coun­tries) and depth (+28,000 online con­sumers) makes it uniquely use­ful in gaug­ing global lev­els of con­sumer con­fi­dence. The upshot is that as of Q3 2011, only 11 of the 56 coun­tries sur­veyed had cit­i­zens that were, on aver­age, con­fi­dent in their future eco­nomic prospects. Not sur­pris­ingly, six were in Asia. Ver­sus both pre-crisis lev­els and those of 2010, the most recent mea­sured lev­els of con­fi­dence dur­ing Q3 2011 were 9.3% below 2H 2006 read­ings and 6.4% those of Q4 2010. In short, most of the global econ­omy still has a long way to go in get­ting its “Mojo” back.

For such a seem­ingly sim­ple crime, the ‘Con­fi­dence Game’ is a rel­a­tively mod­ern inven­tion. And no sur­prise to the denizens of the Big Apple, it was invented (or at least made famous) right here in New York City. On July 8th, 1849 the New York Her­ald ran an item in its crime sec­tion not­ing the arrest of one William Thomp­son. His scam was breath­tak­ingly simple:

• Dress like a wealthy man of leisure
• Walk up to another man of leisure in the street
• Strike up a con­ver­sa­tion that gives the impres­sion that the two of you are acquainted
• Ask for the gentleman's watch in the fol­low­ing way: "Have you con­fi­dence in me to trust me with your watch until tomorrow?"
• Take the watch and walk away, laugh­ing as if the whole thing is lit­tle joke between two friends, never to be seen again

The only prob­lem Mr. Thomp­son encoun­tered was when he relied too much on the city’s large pop­u­la­tion to pre­vent his marks from ever spot­ting him a sec­ond time. Sure enough, some­one who had given him a watch val­ued at $2,800 in today’s money (think of a nice used Rolex) pointed him out on the streets to police and he was arrested after a brawl with the arrest­ing offi­cer. One of his for­mer cell­mates from Sing Sing iden­ti­fied him at the sta­tion­house. The case made the front page dur­ing the sub­se­quent trial, since the accused could rightly say that he had been given the watches will­ingly rather than by force. How could it be theft?

There is a great quote from David Mamet’s movie House of Games, spo­ken by a vet­eran con man, which neatly sum­ma­rizes why such scams work: “It’s called a con­fi­dence game. Why? Because you give me your con­fi­dence? No. Because I give you mine.” If you’ve ever been the tar­get of a scam, you know this is true. The first “tell” of some­one run­ning a game on you is that they appear TOO famil­iar, TOO friendly. They are try­ing to make you feel like they have total trust in you.

But in this lit­tle seed of a crim­i­nal idea is a greater and more impor­tant truth: con­fi­dence is some­thing that is shared by two or more peo­ple. It can grow or shrink, quickly or slowly, and has its roots in the social wiring most human beings share. And from an eco­nomic stand­point, con­fi­dence is an essen­tial lubri­cant of any cap­i­tal­ist based sys­tem. You need con­fi­dence in the legal sys­tem, the market’s abil­ity to set prices fairly, and in your fel­low cit­i­zen to hold up their end of a bar­gain, just to name a few struc­tural neces­si­ties. And you need con­fi­dence that the under­ly­ing econ­omy is sound, that you will con­tinue to have a job, that inter­est rates will remain sta­ble, that infla­tion is under con­trol, and so forth, before you will spend freely.

One of the key dif­fi­cul­ties cap­i­tal mar­kets face at the moment is the chal­lenge of assess­ing the long shadow of the Finan­cial Cri­sis of 2007–2008 and the ongo­ing Euro­pean sov­er­eign debt cri­sis on the world’s Con­sumer Con­fi­dence. While many coun­tries have local sur­veys of their pop­u­la­tions, no two mea­sure­ments are done exactly the same. This makes it hard to com­pare results around the world and over time. We recently came across the Nielsen Global Online Con­sumer Con­fi­dence, Con­cerns and Spend­ing Inten­tions sur­vey, which is a large scale (+28,000 peo­ple) multi­na­tional (+50 coun­tries) and at least a few years span of time (2005 to the present). While it is likely that short-ish con­ti­nu­ity that keeps this dataset from wider use on Wall Street, it is long enough to encom­pass the period before and after the Finan­cial Crisis.

We’ve included sev­eral tables from the Nielsen data, and here are our key takeaways:

As of the most recent read­ings in Q3 2011, the world is not a very con­fi­dent place. A score of 100 is the water­shed between con­fi­dent and dour con­sumers. Only 11 of 56 coun­tries man­age to break above this line – Brazil, China, Hong Kong (mea­sured sep­a­rately), Indone­sia, Malaysia, Philip­pines, Thai­land, India, Saudi Ara­bia, U.A.E, and Nor­way. The clear trends are that Asian coun­tries and exporters of raw mate­ri­als rule the global con­fi­dence roost at the moment.

The world’s least con­fi­dent con­sumers reside in Hun­gary (last score 37), Por­tu­gal (40) Croa­tia (49) and Roma­nia (also 49). Greece had a score of 51 in Q3 2011, and Italy came in at 52.

In terms of com­par­isons to how con­fi­dent the var­i­ous coun­tries’ con­sumer felt before the Finan­cial Cri­sis, back in 2H 2006, very few coun­tries have been able to bounce back com­pletely. On aver­age, the world’s major devel­oped and devel­op­ing economies poll at 9.3% lower con­fi­dence than pre-crisis lev­els. The ones that have been able to set a new and mean­ing­ful fast lap for con­sumer con­fi­dence: Aus­tria, Egypt, Saudi Ara­bia, Turkey, Philip­pines, Tai­wan, and Thailand.

By region, Europe has actu­ally been much harder hit in terms of con­sumer con­fi­dence from the peak than any other area of the world. Across both east­ern and west­ern Europe, con­fi­dence is 23–24% lower than 2H 2006, ver­sus an 11% decline in the Amer­i­cas and 8% reduc­tion in Asia. The U.S. is 28% lower, to be sure, but other parts of the region are only down 14% (Canada) to 21% (Mex­ico). Brazil, as men­tioned ear­lier, is actu­ally up 18% since 2006.

Over the last year (mean­ing later 2011 ver­sus 2010), west­ern Europe is a clear lag­gard as well. Ital­ian con­sumer con­fi­dence took an unsur­pris­ing hit last year, down 27%, with almost all other coun­tries in the region down double-digit per­cent­age terms as well. The big win­ners were in the Mid­dle East (Egypt and Saudi Ara­bia), rather than Asia. The notable excep­tion here was China/Hong Kong at +4/5%.

There’s very much a “Half empty/half full” debate when it comes to any kind of con­sumer con­fi­dence mea­sure­ment as a Buy/Sell sig­nal, of course. In gen­eral, it pays to buy risk assets when things look dread­ful and sell them when skies clear. But the cur­rent pic­ture of global con­sumer con­fi­dence from the Nielsen sur­vey looks very much like one of those sketches of an ice­berg in a children’s text­book. A lot of the mass is below the sur­face, with only a tiny bit pok­ing up out of the water. It pays to con­sider the pos­si­bil­ity that global con­sumer con­fi­dence has gone through a semi-permanent shift to some­thing below the water­line, invis­i­ble to pro­duc­ers of goods and mar­kets alike. If true, this would mean that con­sumers will only slowly begin to reap­pear, essen­tially as the ice­berg melts.

Read more from the author/contributor here.

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