SHAFAQNA (Shia International News Association)
PAKISTAN’S politics might be baffling and its macroeconomic data disturbing, but these have failed to dampen the spirits of consumers, who appear to be in a ‘get go’ mode, both online and offline.
Little wonder that not so affluent Pakistan tops the list of countries with the highest consumer confidence. The trend is endorsed by the findings of US companies Deloitte and Nielsen, besides scores of local researchers. The State Bank’s Consumer Confidence Index also points in the same direction.
While the informal economy is said to be fueling the hyper-market activity by supplementing incomes generated in the formal sector, it is media and the power of connectivity through telephony that is altering the lifestyle aspirations of about 40m households in the country.
Besides, Pakistanis — who save the least in the region — are said to be eating into their past savings to meet both ends of their budget. The average rate of savings is currently at a historic low of 8pc of GDP, against 30.1pc in India and 26pc in Bangladesh.
In its latest report, Nielsen, a provider of information and insight into consumer markets, reported online consumer confidence held steady in the second quarter of calendar year 2014.
“Pakistani consumers are generally optimistic as seen by mostly high consumer confidence scores over the past three years. However, a score of 99 in the first as well as second quarter this year is the highest we’ve seen since the second quarter of 2011,” said Mustafa Moosajee, MD Nielsen Pakistan.
Economists who deal exclusively in verifiable data find it difficult to justify the persistent surge in the consumer market when Pakistan’s GDP growth rate for the last five years has been anemic and the wage trend broadly static
“A growing middle class, rapid urbanisation and an increasing number of women in the workforce has led to an increase in disposable incomes. While convenience is often the deciding factor for purchasing products and services, many consumers are becoming brand-conscious and altering their shopping habits. Growing internet access and mobile technology have increased the power of the consumer, resulting in more online shopping and effective buying decisions,” says Deloitte’s consumer lifestyle report. It provides snapshots of unique behaviours and spending patterns of consumers.
The SBP’s Consumer Confidence Index reported a score 142.26 in July, a tad less than 143.99 in May, but higher when compared with 109.8 in July 2012. The SBP states, “The index covers households’ perceptions relative to the last six months and their expectations for the next semester, including personal financial conditions, overall economy, unemployment and consumption of durable goods. The index is based on the stratified random telephonic survey of more than 1,600 households across Pakistan”.
Consumer giants (Unilever, P&G, Nestle, Coke, Pepsi etc), retailers and global brands (McDonalds, Nike, Levis, Debenhams, Mark & Spencer etc) are aware, and are strategising to suit their interest. Local companies in pharmaceutical, textile and fashion industries etc are not lagging behind either.
The analysts and fund operators can’t explain the trend satisfactorily but are conscious of the expansion in market activity, which includes rising online traffic. Economists who deal exclusively in verifiable data find it difficult to justify the persistent surge in the consumer market when Pakistan’s GDP growth rate for the last five years has been anemic and the wage trend broadly static.
Unfortunately, the hierarchy in economic ministries was found to be least informed about the quiet transformation. They had no clue of the confidence level of consumers or its drivers.
A federal secretary, reached over phone in Islamabad, took time to understand the question and then excused himself. Another federal secretary said: “It does not make sense. How can Pakistanis be spending more when they are earning less?” He explained that the average real income should actually be declining in an average household because of static wage levels and 8pc annual inflation.
Imran Afzal Cheema, secretary of the Board of Investment, responded to a query: “The salaried people are opting for cheaper options to sustain themselves”. He was probably referring to erosion in consumers’ buying capacity because of inflation.
Faisal Bari, an economist, told Dawn from Lahore that the growth in the consumer market points towards massive expansion in the parallel economy. “If you exclude the informal economy from the matrix, you can simply not explain the quantum of activity in the market which is visible to anyone who cares to observe.”
He, however, cautioned drawing cross-country conclusions as most indices are based on tricky perception surveys.
“The recent surge in consumer confidence is said to be weaning somewhat over the last two months,” Dr Hafiz Pasha commented over telephone.
Sayem Ali, chief economist at SCB, attributed the consumer spending spike to easing of inflation, both locally and globally. He thought that smart marketing practices laced with sales and discount deals allured discretionary spenders to the market.
“A portion of new spending is financed by savings. The propensity to save has bottomed out and there is a real possibility that as the burden of fiscal adjustments in the form of higher utility tariffs increases, people would turn to family savings to cover for demands of their lifestyle,” he said.
Muhammad Sohail, CEO of Topline Securities, sees the growth in population and urbanisation and changed lifestyle aspirations as key drivers of consumer market expansion. “The media has played a huge role in altering the choices of consumers and in spreading awareness about the evolving global culture.”
“I know for a fact that at least six mega malls are coming up here with huge investment, and the success of innumerable brands already in the country has aroused a lot of interest in Pakistan as a target market,” Yousuf Jamshed, CEO of LXY Global, informed this writer two weeks back.
According to an index available on the website of Trading Economics, Pakistan occupies the top position (142.26 points), followed by India (128), Indonesia (120.2), New Zealand (116.7) and UAE (109).
There was no public information available on the contours of the consumer market and insight into the spending behaviour of different income classes, gender, age groups and across rural/urban sectors. n