Chinese consumer sentiment edged higher in October, led by a significant improvement in consumers’ willingness to spend, leaving confidence at the highest level since April 2016.
The Westpac MNI China Consumer Sentiment Indicator rose 1.7% to 117.1 in October, building on a noticeable increase in the month before. Two of the five components of the headline indicator improved in October, with small falls in Expected Household Finances, Business Conditions in One Year and Business Conditions in Five Years outweighed by sizeable increases in Durable Buying Conditions and Current Household Finances.
Durable Buying Conditions surged 10.3% to 116.0, the highest level since September 2010, as our survey respondents turned more optimistic about making a large household outlay. This was accompanied by improved readings on the detailed buying indicators for IT products, phones and appliances in October.
Consumers’ assessment of their current finances, which had been under pressure for much of 2016, appeared to turn a corner in October. The Current Personal Finances Indicator rose 5.6% to 111.3 in October, its highest level since May 2014. The rise was led by a higher percentage of respondents who cited higher income as the main reason for a better financial situation.
While the survey showed a strengthening assessment of households’ current financial position, Chinese consumers were less optimistic about personal finances over the coming year, presumably reflecting the still highly uncertain business environment and the continuation of the Chinese Yuan’s downtrend. Both long and short term measures of expected business conditions deteriorated slightly in October, matching a decrease in perceived current business conditions.
The worsened outlook for business conditions and household finances was also reflected in a slight deterioration of the Employment Outlook Indicator.
On the back of the implementation of more tightening policies, attitudes towards real estate across a range of measures in the survey were generally weaker, with the Real Estate Investment Indicator slipping 1.4% on the month. The fall in the main indicator was accompanied by a minor fall in expectations for house prices and a pickup in the percentage of those thinking it was a bad time to buy a house.
Commenting on the latest survey, Senior Economist of MNI Indicators Andy Wu said, “The positive result in this month’s survey reaffirms our view that consumer conditions are on the mend following some weakness in the early part of Q3 due to the recent floods in China. More positively, the notable uptick in consumers’ willingness to spend on durables and leisure items points to some improvement in the retail environment. Despite these positives, Chinese consumers are still cautious about the outlook for business conditions and worried about the implications for jobs. Partly as a result, respondents were also less optimistic about their future personal finances. It remains to be seen whether these less favourable monthly outcomes will feed through to the rest of the report and start weighting on overall sentiment over the coming months.”
Westpac Senior Economist Matthew Hassan said, “Chinese consumer confidence is again showing promising signs of a sustained lift with the more positive picture on family finances and durables spend a welcome development particularly from the point of view of prospects for an associated lift in demand. That said, the lacklustre picture on business conditions is clearly still a headwind feeding into consumer concerns about job security and a ‘risk averse’ attitude to spending and saving decisions. Even with the latest gain it still looks like a sustained turnaround in business conditions will be required to drive a stronger and broader upturn for consumers.”
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Westpac MNI China Consumer Sentiment Indicator Increases To Six-Month High In October - Pickup In Durable Buying Conditions Leads Improvement
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