Saturday, June 26th, 2010 - MasterCard Worldwide
Singapore, 25 June 2010 – A robust turnaround in consumer spending is expected in 2010 across the Asia/Pacific , with double-digit retail sales growth predicted in China, Hong Kong, India, Indonesia Korea, Malaysia and Singapore as a result of improving fundamentals. This is based on indications provided by the inaugural MasterCard Worldwide Index of Consumer Spending Capability (MWICSC).

The new Index has been developed to provide insights into consumer spending over a period of a year. While consumer confidence data has typically been leveraged to forecast consumer spending, it is not a leading indicator of spend. The MasterCard Worldwide Index of Consumer Spending Capability builds on the understanding gained from the MasterCard Worldwide Index of Consumer Confidence, combining it with six other key factors that affect consumer spend - (i) household income, (ii) household indebtedness, (iii) interest rates, (iv) equity market, (v) property prices, and (vi) consumer price inflation. The Index and its accompanying reports do not represent MasterCard financial performance.

The combination of these factors cover important areas that determine how “capable” households are in a given market to spend in the next 12 months – how much they have to spend (household income after tax, household indebtedness and interest rates), how much of their spending will be underpinned by the wealth effect and their future outlook (property prices, stock market and consumer confidence), and how much of their intention to spend will be modified by changing price levels (inflation).

The MWICSC data is tracked and compared with the previous year, with year-on-year changes in consumer spending capability providing an indication of the strengthening or worsening of retail sales.

In 2010, all 14 markets show positive MWICSC year-on-year changes compared with 2009, indicating rising consumer spending capability moving forward. Key highlights from the region include:

- A dramatic turnaround in consumer spending capability is expected in Hong Kong (+12.5), Korea (+11.9) and Taiwan (+15.5). China’s (+1.9) and Japan’s (+1.2) MWICSC scores have also increased from 2009. The strengthening MWICSC scores suggest that retail sales will grow in these markets in 2010, and double digit retail sales growth is expected in China, Hong Kong and Korea.
- India’s MWICSC shows a robust increase of 9.9 points in 2010, signaling possible double digit retail sales growth for the year.
- In South-East Asia, the overall picture is also a positive one, with Vietnam having the strongest increase in consumer spending capability (+17.8). This is followed by Singapore (+9.4), Thailand (+7.2), Indonesia (+7.2), Philippines (+6.6) and Malaysia (+5.7). Double digit growth in retail sales is expected in Indonesia, Malaysia and Singapore.
- Australia and New Zealand are also seeing a strengthening of their MWICSC – an increase of 12.7 points in Australia and 8.1 points in New Zealand. While the MWICSC has increased in Australia, retail sales are expected to grow at a similar pace this year as in 2009, given that sales were driven by an unprecedented level of government fiscal spending in 2009. A modest growth in retail sales is expected in New Zealand.

Dr Yuwa Hedrick-Wong, economic advisor, Asia/Pacific, MasterCard Worldwide said, “The new MasterCard Index of Consumer Spending Capability shows that consumers across Asia/Pacific are in a much stronger position to spend more in 2010 compared with last year, as well as against the benchmark of their levels of spending in the past ten years. In markets like Indonesia, Hong Kong, Singapore, India, and Malaysia, the increase in their spending capability this year is expected to be particularly strong. The timing of this rise in MWICSC is especially important as governments everywhere are exiting their aggressive fiscal spending programs introduced last year. A rise in MWICSC in Asia/Pacific therefore means households are in a position to take up the slack left behind by the withdrawal of government spending to keep domestic demand growing, which will in turn enable the region to better withstand the continued market volatility and uncertainty that is likely to persist through much of this year.”

As men and women across the region become more able to reach for their wallets, what are they spending on?

The latest MasterCard Worldwide Survey on Consumer Purchasing Priorities shows that consumers in Asia/Pacific continue to want to wine and dine, with 65% of them planning to spend on dining and entertainment in the six months ahead. Fashion and accessories (44%) comes second, followed by consumer electronics (37%), fitness and wellness, and tuition (both at 32%). This mirrors findings from the previous surveys.

The latest MasterCard Survey on Consumer Purchasing Priorities was conducted from 15 March to 12 April 2010 and involved 10,503 consumers from 24 markets . Data collection was via internet surveys, personal, telephone and Computer Aided Telephone interviews, with the questionnaire translated to the local language wherever appropriate and necessary. The survey and its accompanying reports do not represent MasterCard financial performance.

A majority (52%) of consumers in the region plan to maintain their discretionary spending at the same level as it was six months ago, while 18% plan to increase it. Compared to the last survey, fewer consumers are planning to decrease their discretionary spending (30% vs. 34% in the last survey). Consumers in China (26%), India and South Korea (24% each) are the most likely to increase their discretionary spending in the six months ahead, whereas consumers in the Philippines (65%), Indonesia (49%) and Thailand (47%) are prone to reduce their discretionary spending.

Key highlights from the region include:
- Consumers in Thailand (79%), Vietnam (77%), South Korea and New Zealand (73% each) are the keenest to spend on dining and entertainment in the six months ahead.
- Consumers in Vietnam (65%), South Korea (58%) and Japan and New Zealand (50%) plan to glam it up in the coming six months, intending to spend on fashion and accessories.
- Consumers from tech-savvy Hong Kong (53%), Singapore (52%) and Taiwan (50%) are the most likely to spend on consumer electronics in the next six months.
- Consumers from Hong Kong (66%), Indonesia (65%) and the Philippines (62%) are also keeping in mind the less fortunate as they spend, planning to donate to charity in the six months ahead. Across the region, 53% of consumers plan to donate to charity, with 55% of them planning to donate between 1 and 5% of their annual income.

The MWICSC is constructed by “normalizing” and using a weighted combination of the different values and measures used in presenting the changes in seven factors, employing data going back ten years. The seven factors include (i) household income, (ii) household indebtedness, (iii) interest rates, (iv) equity market, (v) property prices, (vi) consumer price inflation and (vii) consumer confidence. Measured on a scale of “0” to “100”, “100” denotes the highest possible net combination of the seven factors in the next 12 months based on the historical pattern of the last ten years. Conversely, “0” represents the lowest possible net combination of the seven factors. An index value of “50” denotes a level of spending capability at their historical averages of the past ten years.

For forecasting purposes, the MWICSC values for each of the 14 markets in Asia/Pacific are then compared on a year-on-year basis (transformed into annual differences). There are two considerations in using MWICSC to forecast retail sales. The first is the absolute value of MWICSC itself. A MWICSC value above 50 indicates a level of consumer spending capability that is above the 10 year historical average of the 7 factors combined. The second is the year-on-year change of the MWICSC, which allows for comparison with the previous year. Taking account of both considerations, a year-on-year increase in MWICSC from 60 to 70, for example, would indicate a very strong expansion of consumer spending capability. On the other hand, an even stronger year-on-year increase in 2010 of 25 points, but rising from 35 to 60, means consumer spending capability has merely returned to slightly above the average.

MasterCard and its Suite of Research Properties
MasterCard puts out a series of ongoing consumer surveys and research Indices in the Asia/Pacific, Middle East and Africa. These include the MasterCard Survey on Consumer Purchasing Priorities, the MasterCard Worldwide Index of Consumer Purchasing Resilience, the MasterCard Worldwide Index of Consumer Confidence and MasterCard Worldwide Index of Women’s Advancement.

Besides these, MasterCard also regularly releases its Insights reports; the series is part its ongoing research and analysis of business dynamics, financial policies and regulatory activities in the Asia/Pacific, Middle East and Africa region. Over 70 Insights reports have been produced since 2004. MasterCard has also released a series of four books on Asian consumer insights, authored by its Asia/Pacific economist, Dr. Yuwa Hedrick-Wong and published by John Wiley & Sons.
The MasterCard Indexes and Insights reports are available at

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Eugenia Koh
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spending capability, spend, retail sales, Asia/Pacific, MasterCard, Dr. Yuwa Hedrick Wong



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