Survey Shows the Fifth Wave of the Pandemic Has Reversed the Positive Trend in Consumer Sentiment Shown Since Mid-2021

  • The fifth wave of the pandemic has impacted consumers’ household finances, with 66% of consumers saying their income has stayed the same or decreased in the last three months; more consumers still planned to apply for credit to meet financial needs
  • Lenders’ sustainability practices influence consumer decision-making providing opportunities to build their businesses and influence borrowers to behave greener

Global information and insights company and Hong Kong’s leading consumer credit reference agency TransUnion (NYSE: TRU) today announced the 2022 Q1 results from its quarterly Consumer Pulse Survey, which shows the clear impact the fifth wave of the pandemic has had on Hong Kong. The tightened social distancing regulations have affected companies and small businesses leading some to close. This resulted in two-thirds (66%) of respondents reporting their household income stayed the same or decreased in the last three months, and 58% expected the trend to continue in the next 12 months.

The latest Consumer Pulse Survey polled 1,088 Hong Kong consumers between February 14-23, 2022. During the period, Hong Kong was heavily hit by the Omicron variant with record-high numbers of confirmed cases. The comparison periods are Q4 (survey conducted between November 1-18, 2021) and Q3 (survey conducted between August 16-31, 2021)

Consumers’ household finances impacted by worsening market environment

According to the Hong Kong Census & Statistics Department, the adjusted unemployment rate between December 2021 and February 2022 climbed to 4.5%, from 3.9% in the previous three-month period1. The Consumer Pulse Survey results help further explain what this has meant for consumers. Twenty-one percent of consumers responded their salary had been reduced, where 12% of consumers reported that someone in their household had lost their job. A further 18% reported work hours had been reduced. There was a five percentage points increment increase in consumers reporting someone in their households who was furloughed (15%).

In this challenging market environment, 27% of consumers said they were not expecting to be able to pay their bills and loans in full, which was a five percentage points increase, and a reversal of the trend shown in the last few rounds of surveys, where it had fallen from Q2 (28%) to Q4 (22%). Among those who were expecting not to be able to meet their obligations, there was also a continuing trend of more people using their credit accounts to handle bills, with less planning on dipping into their savings (37%, down five percentage points from Q4, and eight percentage points from Q3) or borrowing money from friends or family (24%, down five percentage from Q4 and 15 percentage points from Q3). Instead, over a quarter (25%) planned to pay a partial amount (up two percentage points from Q4), 19% planned to utilize a payment holiday or other accommodation (up one percentage point from Q4 and three percentage points from Q3).

In another trend reversal from the previous Q4 results, more consumers had cut back on discretionary spending, including dining out and other entertainments (an increase of four percentage points to 46%) while fewer people planned to increase their discretionary spending (down four percentage points to 21%). Retirement saving was also impacted. Only a quarter (25%) of respondents said they planned to save more for their retirement, down eight percentage points over the previous quarter.

“The fifth wave of the pandemic has severely impacted society in Hong Kong and disrupted gradually improving consumer sentiment that started in mid-2021,” said Eric Cheung, Senior Director and Head of Solution Consulting of TransUnion Asia Pacific. “While the financial impacts on household income show a similar pattern to previous waves, consumers are making more use of credit to better manage their outgoings. Previous rounds of our survey have shown that the market is quick to recover once the pandemic stresses began to ease, and we are confident that Hong Kong will recover from this wave of the pandemic once it subsides as it has done before.”

More consumers plan to apply for new credit to meet their financial needs

Nearly half (48%) of respondents planned to apply for new credit or refinance existing credit, up eight percentage points from Q4. Of those who planned to apply for new credit, 46% of them planned to apply for personal loans, followed by credit card (39%) and auto loans (33%). Credit cards are the most widely-held consumer credit product in the Hong Kong market, but from our latest survey, fewer consumers (down five percentage points) planned to apply for a new one.

While consumers are using credit tools to meet their financial needs, they are also looking to the government for relief: 57% of respondents were at least somewhat reliant on financial support from the government to get through the pandemic.

“Helping consumers who are experiencing another period of financial hardship requires the combined efforts of different stakeholders in our society,” said Eric. “Financial institutions should be proactive in communicating with consumers to understand the challenges they are experiencing while employing insight-led strategies to manage their portfolio and risk effectively.”

Lenders’ sustainability practices influence consumer decision-making

The Q1 Consumer Pulse Survey also explored consumers’ attitudes to sustainability. Two in five (40%) of respondents consider a lender’s sustainability practices as very important to them when deciding to purchase or refinance with the lender. More than four in five (81%) of consumers believed if a prospective lender offers financial incentives related to their carbon and sustainability footprint, it would influence them to behave greener. These results revealed the increasing importance of sustainability to consumers when they are making decisions on credit and loan products, and showed a clear direction to the industry on product design and development in the future in order to address consumers’ concerns.

Eric added: “Sustainability is becoming an increasingly important issue for the financial industry with increasing public awareness and the government’s plan to develop Hong Kong as the green finance hub within the Greater Bay Area and internationally. As a key pillar of the Hong Kong financial industry, the credit market is advised to adopt sustainability practices more actively to meet customer needs and to support to a greater purpose.”

TransUnion’s research and credit education tools are being updated regularly on its COVID-19 website as the company continues to support consumers and businesses around the globe.

1. Latest seasonally adjusted unemployment rate increased from 3.9% in November 2021 - January 2022 to 4.5% in December 2021 - February 2022. (source: Census and Statistics Department)