Expectations for Personal Finances Pick-Up as Policy Stance Turns Supportive
Chinese consumer sentiment fell slightly in January as the outlook for jobs remained subdued and spending on big ticket items fell to a new record low, offsetting an improvement in consumers’ expectations about their future personal finances.
The Westpac MNI China Consumer Sentiment Indicator decreased 0.3% on the month to 112.1 in January from 112.5 in December. While managing to hold on to most of December’s small bounce, confidence is only a little above the record low seen in October 2014. The Westpac MNI China CSI is down 8% since January 2014, reflecting a difficult year for the domestic economy.
The same sluggishness that typified the latter half of last year carried through to 2015, with levels for business conditions, the labour market and real estate outlook all subdued in absolute terms, although they are all higher than their respective 2014 troughs.
Four of the five components that make up the Westpac MNI China CSI decreased between December and January. Consumers were less optimistic about the outlook for business, with both Business Conditions in One Year and Business Conditions in Five Years shedding some ground in January after an encouraging improvement in December.
While the survey showed a weakening assessment of households’ current financial position, Chinese consumers were more optimistic about personal finances over the coming year, presumably reflecting the more accommodative policy stance that emerged over the final quarter of 2014. Lower inflation is another possible contributing factor.
Action on policy, though, has yet to feed through to expenditure on big ticket items. The Durable Buying Conditions Indicator has been the worst performing component of the survey recently and in January it edged down to another series low, the third new low in four months.
Attitudes towards real estate across a range of measures in the survey were generally weaker with the Real Estate Investment Indicator slipping on the month, albeit still higher than the level recorded in November. The fall in the main indicator was accompanied by a minor fall in expectations for house prices and a reduction in the percentage of those thinking it was a good time to buy a house. On a more optimistic note, a growing proportion of respondents, 19.3%, felt that real estate was the wisest place for savings in January, while the proportion indicating that a housing purchase or down-payment was their primary motivation for saving, also increased.
Commenting on the data, MNI Indicators Chief Economist Philip Uglow said, “Consumers entered 2015 on a softer note with confidence slipping back from an already low level, highlighting the weak level of domestic demand in China. Respondents were more optimistic about their future personal finances, possibly due to the recent rate cut, although it’s too early to say if this more positive tone will feed through to the rest of the report over the coming months.”
Westpac’s Senior International Economist Huw McKay commented that “it is disappointing that consumer confidence has not built on the promising signs observed in both November and December. However, we see the January result through the prism of a gradual improvement dating back to the October trough, with forward looking indicators beginning to distance themselves from current assessments, a sign that the economy is slowly putting the worst behind it.”