Asia-Pacific consumer sentiment: A mix of growth and challenges

Australia stands out within the APAC region for its surge in consumer confidence. In the fourth quarter of 2024, more than a third of consumers (34 percent) expressed optimism about economic conditions, marking a 12-percentage-point increase compared with the previous three months. Consumers attributed this heightened optimism primarily to increased government support for households and significant advances in science. This positive trend spans all income groups, especially the high-income bracket, with holiday shopping driving a broad-based increase in spending intentions across discretionary, semi-discretionary, and essential goods. Domestic travel plans have also surged, with significant increases in spending intentions for domestic flights, hotels, and short-term rentals. While traditional in-store shopping remains popular, there’s a growing acceptance of online and omnichannel shopping, particularly for consumer electronics, as well as a modest rise in the use of “buy now, pay later” (BNPL) services, indicating new ways consumers are managing their finances while maintaining spending levels.

Sentiment in China rebounded in the past quarter but remains below the level of six months ago as older consumers remain pessimistic. However, there was a significant jump in Gen Z optimism, which saw a 14-percentage-point increase, aligning with a drop in the youth unemployment rate in urban centers by more than one percentage point. Conversely, baby boomers’ optimism dropped by six percentage points, though members of that generation remain the most optimistic overall. Additionally, there has been an increase in intended spending on fresh produce and a marked reduction in spending on alcohol, suggesting a shift toward healthier and more essential purchases.

At the same time, planned spending on hotel and resort stays, jewelry purchases, and the use of food delivery apps has declined, indicating that consumers remain cautious about discretionary spending amid economic uncertainty.

India exemplifies both turbulence and growth in the APAC region, with consumers splurging and embracing new shopping behaviors; overall sentiment, though, remains stagnant. Indian consumers exhibit positive net spending intentions across all categories, from essential items such as furniture and vitamins to discretionary purchases such as footwear, pet care services, and vehicles. This broad willingness to invest reflects a stable economic outlook.

However, consumer sentiment in India has been stagnant for more than a year, with a notable gender disparity: female sentiment has dropped by 8 percent, while male sentiment has increased by 6 percent, a trend observed across all income levels. Additionally, the number of consumers planning to shop in physical stores has halved to just 14 percent, while omnichannel shopping has surged by 20 percentage points to 74 percent. This shift underscores a significant transformation in consumer habits, driven by the convenience and flexibility of online platforms.

Japanese consumer sentiment has generally declined, marked by a notable drop in spending intentions for alcohol and a significant shift from in-store to omnichannel shopping, particularly in vehicle purchases and skincare. Despite these headline changes, overall consumer behavior remains relatively stable, though it is more conservative compared to other markets. Many consumers are trading down, opting for private labels, and switching retailers—a trend that has been on the rise since early 2024, signaling a growing preference for value purchases. The omnichannel shopping trend extends beyond specific categories, encompassing a wide range of products. This reflects a broader shift in consumer behavior toward convenience and flexibility, indicating a gradual but steady evolution in the Japanese market.

Consumer optimism in South Korea has remained steady, driven by high-income individuals. Yet pessimism about the economy surged by 11 percentage points to 37 percent, with declines in spending intentions for cruises and home decoration products. There was increased intent to purchase vehicles, indicating a shift toward personal mobility; this was particularly notable among younger consumers, who also increasingly favor online-only retailers. The number of younger consumers shopping only online jumped by nine percentage points, while the number of older consumers in that category fell by 12 percentage points. Beneath this behavioral noise, however, South Korea’s steady sentiment suggests a resilient consumer base that is adapting to new shopping behaviors and economic conditions.

Consumer sentiment appears less buoyant in advanced APAC economies than in Europe and the United States. In Australia, economic activity has virtually stalled, and Japan’s economy contracted in the second quarter, primarily because of the repercussions of the Noto earthquake in early 2024 and slowing economic growth.¹Tetsushi Kajimoto, “Japan economy expected to shrink in Q1 due to weak consumption: Reuters poll,” Reuters, May 12, 2024. While South Korea’s economy expanded faster than anticipated,²Cynthia Kim and Jihoon Lee, “South Korea Q1 GDP growth smashes estimates, but outlook’s uncertain,” Reuters, April 25, 2024. consumer confidence there has declined. However, there is a pronounced generational divide: Gen Xers and baby boomers are more pessimistic about the economy than millennials and Gen Zers.³Generation X was born between the early 1960s and 1980; baby boomers were born between 1946 and 1964; millennials were born in the 1980s and 1990s; and Gen Zers were born between 1997 and 2012. Consumer optimism in China increased in the second quarter, primarily fueled by younger generations, while confidence dipped in India ahead of the national election results. This decline was particularly pronounced among baby boomers.

While spending intentions for the coming quarter are positive in some APAC markets, they are predominantly negative in others. In India, consumers consistently express net positive spending intent for both essential and semi-essential items, including fresh produce, baby supplies, fitness, skin care, and international travel. Conversely, Chinese consumers intend to spend more in categories such as fresh produce, baby supplies, and fitness and wellness, but less on cruises, food delivery, and nonalcoholic beverages. In Japan and Australia, net spending intent is largely negative, except for a few essential categories such as groceries and gasoline. Consumers in these countries show the least inclination to spend on luxury and nonessential items such as jewelry, furniture, hotels, short-term rentals, dining out, and accessories. Overall spending intent remains negative across all categories in South Korea.

Consumer demand is rising for the seamless integration of physical and digital retail offerings, or a so-called phygital experience.¹Praveen Adhi, Eric Hazan, Sajal Kohli, and Kelsey Robinson, “Omnichannel shopping in 2030,” McKinsey, April 9, 2021. According to the survey, consumers are using a broader range of channels than ever before to purchase groceries and other goods, with South Korea, China, and India showing particularly high levels of omnichannel engagement. In those countries, more than 50 percent of consumers expect to use multiple channels for shopping across all categories (except vitamins, supplements, and over-the-counter medicines in South Korea). Australian and Japanese consumers prefer a mixed shopping approach, tending to favor in-store purchases for groceries, personal-care products, vitamins, over-the-counter medications, household supplies, and nonalcoholic beverages. Yet for categories such as sports and outdoor equipment and consumer electronics, Australian and Japanese consumers prefer an omnichannel approach.

Despite economic uncertainty promoting increased saving, APAC consumers are increasingly willing to spend more in select categories. Between 60 and 80 percent of consumers in India and China are increasing their spending overall, while less than a third of consumers in Australia and South Korea are splurging on travel and restaurant experiences. Notably, Japanese consumers are increasing their spending on jewelry and accessories. And while overall economic optimism has declined since the start of the year, with more than three-quarters of consumers across critical APAC markets switching to alternatives that are more budget-friendly across numerous categories, fewer South Korean shoppers are opting to trade down compared with the previous quarter.

APAC consumers are actively adapting their shopping habits—for example, switching brands, trying new digital shopping methods, and opting for private-label brands. Across the region, more than 60 percent of consumers say the primary motivation for switching brands or retailers is the pursuit of better value. Quality and novelty also play crucial roles in influencing consumer behavior. The shift has been particularly significant in China: 86 percent of consumers have altered their shopping behavior in search of greater value, an increase of seven percentage points from the previous quarter. In contrast, consumers in Japan are changing their behavior at a slower pace, demonstrating greater brand loyalty and a preference for familiar shopping channels.