Study: Majority of HK consumers plan to cut spending due to recession

More than half of Hong Kong consumers are concerned about inflation and and the threat of recession in 2023, with many planning to cut back on spending (73%) and build up savings (63%).

Conducted in November 2022, the quarterly consumer pulse study surveyed 1,011 consumers in Hong Kong, examining shifting consumer attitudes and behaviours based on the dynamics of income, debt and identity theft, with respondents ranging from Gen Z, millennials, Gen X and baby boomers.

Findings showed that inflation and the threat of recession are the top concerns among consumers, with 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%).

Findings also showed 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%) 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. Meanwhile, fears of recession continue to grow that, 34% of Hong Kong consumers surveyed expected 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,” he added.

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.

“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.”

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