Survey Shows Improved Sentiment as Economy Rejuvenates
- Significant improvement reported in Hong Kong consumers’ household finances following gradual recovery of economy
- Inflation and the threat of recessions remain top concerns, although less so than in previous quarters
- Consumer appetite for credit continues to rebound, with younger generations being the growth engine for new credit
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 Hong Kong consumers’ rising optimism over household finances despite concerns about market volatility.
The new survey conducted in May 2023 found consumer sentiment improved significantly in the context of more positive economic conditions. Overall, 46% of respondents reported better than planned household finances, a 20 percentage point increase from Q1 2023. Additionally, 42% of respondents reported higher household incomes over the past three months, a similarly significant increase of 19 percentage points from the previous quarter.
Consumer confidence soars as inflation fears and the threat of recession ease
The Hong Kong economy is rebounding thanks to the strong recovery of inbound tourism and domestic demand1. The survey findings reveal that 62% of consumers are optimistic about their household finances in the next 12 months, up significantly from 34% in the previous quarter. Half (50%) of consumers also expect their household income to increase in the year ahead, up 16 percentage points from last quarter.
The survey showed that consumers still have some concerns despite improving economic conditions, with inflation (58%), the threat of recession (44%) and stock market volatility (37%) leading unease, followed by rising interest rates (35%). Concerns over stock market volatility and rising interest rates have grown by seven and five percentage points quarter-over-quarter, respectively. Comparatively, concerns over inflation and the threat of recession have reduced by 10 and seven percentage points, respectively.
Against the backdrop of generally improved consumer sentiment, more than a quarter (27%) of those surveyed said they had increased their discretionary spending, and over a third (34%) of consumers also added or expanded their digital services, subscriptions and memberships in the last three months – an increase of 15 percentage points compared to last quarter. The proportion of consumers that plan to increase household spending increased, with almost a third (30%) of consumers intending to increase their discretionary spending (e.g., eating out, travel, entertainment) in the upcoming three months, compared to 25% in the last quarter.
"There is no doubt that inflation, rising interest rates and stock market volatility will all continue to influence how consumers manage their household finances, but with its post-pandemic economy turn-around, Hong Kong’s residents are clearly gaining confidence about their financial outlook,” said Kevin Chen, principal, Financial Services Research and Consulting at TransUnion Asia Pacific.
Younger consumers drove demand for new credit services
Across generations, Gen Z* (37%) has the most interest in new credit services, although less than one-third (29%) of Hong Kong consumers plan to apply for new credit or refinance, unchanged from the previous period. However, across all demographics, over half (57%) report that rising interest rates have a moderate to high impact on their decision around seeking new credit, an 11 percentage-point increase from the last quarter.
Despite concerns regarding higher interest rates, more consumers planned to apply for new home loans (16%), the first increase in a year, up three percentage points from the previous quarter. Consumer appetite for car related credit activity saw the biggest increase in the survey. Plans for a new car loan or lease and car loan refinancing rose seven and eight percentage points to 16% and 13%, respectively.
“As consumer interest in new credit starts to rebound, financial institutions should capture opportunities in the market to grow their business. By using advanced analytics and modeling, they can better tailor their offering to the emerging needs of an increasingly positive consumer base,” added Chen.
TransUnion’s Consumer Pulse Study surveyed 910 consumers in Hong Kong during May 4–17, 2023. 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 Q2 2023.