Hong Kong,

Hong Kong Consumer Sentiment on Household Finances Improves but Recession Fears Grow for 2023

  • TransUnion’s latest Consumer Pulse Study shows an increased optimism among Hong Kong consumers over their household finances in 2023, but fears of recession grow.
  • Rising inflation and recession threat are the top concerns among consumers.
  • Consumer appetite for credit falls for the fourth consecutive quarter amid interest rate hikes.

Global information and insights company and Hong Kong’s leading credit reference agency, TransUnion (NYSE: TRU), today released its latest quarterly Consumer Pulse Study. It reveals that Hong Kong consumers, for the first time in a year, show increased optimism over their household finances; but they are, at the same time, increasingly wary of recession in 2023.

Consumer confidence held back by worries over recession and inflation

Findings show that 36% of Hong Kong consumers surveyed are optimistic about their household finances in 2023, up four points from the previous quarter. Almost one-third (31%) also expect their income to increase in the year ahead, two points higher than last quarter. These are the first improvements seen in a year, as the city reopens its borders and lifts nearly all pandemic restrictions.

However, fears of recession continue to grow, with 34% expecting the Hong Kong economy to go into a recession in 2023, up by a significant 10 points from the previous quarter.

“This represents a unique moment in time for Hong Kong as it charts its way back to normalcy in the face of a complex economic climate”, said Kevin Chen, principal, Financial Services Research and Consulting at TransUnion Asia Pacific. “The local economy is, on one hand, expected to benefit from reopening and the subsequent influx of visitors and investors. On the other hand, global economic headwinds from rising interest rates, inflation and slowing external demand will continue to weigh on the Hong Kong economy.”

Additional findings show that inflation and the threat of recession are the top concerns among consumers, with around three-fifths (63% and 56%, respectively) ranking them among their top three concerns for their household finances over the coming months. When asked about how they plan to deal with a potential economic slowdown, the majority of consumers plan to cut back on spending (73%) and build up savings (63%). Across generations, the youngest group, Gen Z, appears to have the lowest desire for reducing spending (52%), as compared to Gen X and Baby Boomers who are the most open to reducing spending (both at 81%).

Consumer appetite for credit falls for the fourth quarter

Against the backdrop of macroeconomic uncertainties and rising interest rates, consumer appetite for new credit continues to decrease. Less than one-third (31%) of consumers surveyed plan to seek new credit, down for three consecutive quarters from 48% at the beginning of 2022. In fact, rising interest rates are a key factor affecting consumers’ decisions on seeking new credit. More than half (52%) say that rising interest rates have high to moderate impact on whether they would apply for new credit, up nine points from last quarter.

Among those seeking new credit, there is a shift in product preference as fewer consumers (51%) plan to apply for a credit card, down six points from the previous quarter. At the same time, consumer appetite for refinancing personal loans sees the largest increase, up seven points to 19%; while mortgage loans see the biggest decline, down nine points to 17%.

“The threat of increasing interest rates and high inflation combined with recession fears represent the latest in a series of significant challenges consumers have faced in recent years,” added Chen. “Financial institutions need to better understand consumers’ needs in order to capture credit business amid subdued demand. They can leverage digital technologies to enhance their customers’ onboarding experience, while also employing insight-led strategies to manage their portfolio and risk effectively.”

TransUnion’s Consumer Pulse Study surveyed 1,011 consumers in Hong Kong during November 3-15, 2022. This quarterly study examines shifting consumer attitudes and behaviors based on the dynamics of income, debt, and identity theft, with respondents ranging from Gen Z (born 1995-2004), Millennials (born 1980-1994), Gen X (born 1965-1979), and Baby Boomers (born 1944-1964). For more information, please view the full report of the Consumer Pulse Study Q4 2022.