Chinese consumer sentiment improved in March led by a rebound in personal finances, leaving sentiment at the highest level since July 2014.
The Westpac MNI China Consumer Sentiment Indicator increased 2.4% on the month to 114.7 in March from 112.0 in February, distancing from October’s trough before the latest round of monetary policy easing began. The latest increase is a tentative sign that consumers are growing more optimistic, with the PBOC’s second rate cut of this cycle materialising in February, and a range of commentary from the authorities suggesting further stimulus measures may be implemented to prevent the economy from slowing too much. Notably, easier policy settings, with the promise of more to come, seem to have outweighed the lowering of the annual growth target in the minds of consumers.
Household finances, which had been under pressure for much of 2014, look to have put the worst behind them. In March, Current Personal Finances, one of the five components that make up the Westpac MNI China Consumer Sentiment Indicator, was the biggest contributor to the overall rise in confidence. The rise was led by a higher percentage of respondents who cited higher income as the main reason for a better financial situation. Lower income households as well as the older age group (55-64 years old) were especially more upbeat on their personal finances, correcting what we saw as excessive weakness in the prior month among these segments.
Moreover, a rise in the percentage of respondents who were satisfied with the current level of prices, which fed into lower expected inflation over the year ahead, suggests that the benign price environment and the now overt easing bias for policy are beginning to manifest in rising confidence levels.
Of the other three components that comprise the main indicator, both long and short term measures of expected business conditions improved in March, matching an increase in perceived current business conditions. Out of those who thought business conditions over the year would improve, 40.2% cited supportive government policy as their main reason for optimism.
The Durable Buying Conditions Indicator was the only component of the Westpac MNI China CSI that fell in March. Durable Buying Conditions have been subdued for most of the past year and, after picking up in the previous month, in March it reverted to recent type, falling back to the lowest level in the survey’s history.
Sentiment on the housing market continued to improve, with house price expectations rising again. Most measures of housing sentiment in the survey are now close to the levels observed prior to the sharp deterioration in conditions that began in mid-2014.
Commenting on the data, MNI Indicators Chief Economist Philip Uglow said, “The message from consumers in March was broadly one of optimism and was perhaps the most emphatic signal this year. Although this development after a few months of stabilisation in the overall indicator is a welcome sign, sentiment is coming off a low level and a meaningful, sustained improvement in conditions could take time to materialise.”
Westpac’s Senior International Economist Huw McKay said that “Chinese consumers have now responded positively to both of the interest rate cuts delivered so far in the current cycle. That underlines the fact that policy settings were overly tight in 2014, and that the progressive unwinding of those settings will benefit the economy this year and next. While the structural challenges confronting the economy are genuine, the survey argues very strongly that policy remains a potent cyclical force in the minds of consumers.”
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Westpac MNI China Consumer Confidence Rebounds In March - Household Finances Pick Up As Easier Policy Outweighs Lower Growth Target
Date 25/03/2015