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Consumer confidence in China regained some ground in June, seven months since the authorities made the first cuts to interest rates in the current easing cycle.
The Westpac MNI China Consumer Sentiment Indicator rose 1.1% to 112.3 in June, having remained steady at 111.1 in the previous two months. Consumers aged 55-64 recovered most of last month’s fall, with confidence among that cohort up 7.4%, while the two younger cohorts –who have been relatively more optimistic in recent months– reported little change over the month.
Sentiment remains relatively subdued, just below the 12-month average of 112.4. Its relative resilience since the end of 2014 in the face of softer economic data is an encouraging signal that monetary policy is having an impact.
Aided by May’s rate cut and some modest improvement in industrial production, it was consumers’ views on the state of business conditions which led the rise in sentiment, with an increase in expectations for Business Conditions in Five Years the main driver. Positively, there were increases in both Business Conditions in One Year and Current Business Conditions which historically have provided a good leading indicator of future economic growth.
Personal finances recovered somewhat in June, with another positive reading in the Investment Return Indicator possibly playing a part. The increase in the Expected Personal Finances indicator, by 1.7% on the month, leaves it a little below the average of 2014, but provides a tentative sign that household balance sheets may be on the road to recovery. Note that the sharp gyrations in the stock market at the end of May prompted a more precautionary approach to savings with an increasing percentage of respondents selecting bank deposits as the wisest place for savings at the expense of local shares.
There were mixed signals across the spending data. Durable Buying Conditions were down 1.7% on the month following a 2.5% increase in May. There was, however, a significant increase in car buying sentiment with the Car Purchase Expectations Indicator increasing 3.3% to 100.1 in June from 96.9 previously, the highest since August 2014.
Commenting on the data, MNI Indicators Chief Economist Philip Uglow said, “There are certainly some positives that can be drawn from the June data particularly the more upbeat readings on business conditions. Sentiment, though, remains at a subdued level in absolute terms with interest rate cuts and other supportive measures yet to provide a significant boost.”
Westpac’s Senior International Economist Huw McKay said that “The scale and direction of the change in confidence is entirely consistent with the recent trend of incremental improvement in the official activity data. The level of confidence, which is 7.7% below average, reflects the ‘new normal’ of diminished growth expectations.” He noted further that “An increasing number of our respondents now assess that the stock market is ‘expensive’, which implies that the market may struggle to top 5000 again in the short run.”
The Westpac MNI China Consumer Sentiment Indicator rose 1.1% to 112.3 in June, having remained steady at 111.1 in the previous two months. Consumers aged 55-64 recovered most of last month’s fall, with confidence among that cohort up 7.4%, while the two younger cohorts –who have been relatively more optimistic in recent months– reported little change over the month.
Sentiment remains relatively subdued, just below the 12-month average of 112.4. Its relative resilience since the end of 2014 in the face of softer economic data is an encouraging signal that monetary policy is having an impact.
Aided by May’s rate cut and some modest improvement in industrial production, it was consumers’ views on the state of business conditions which led the rise in sentiment, with an increase in expectations for Business Conditions in Five Years the main driver. Positively, there were increases in both Business Conditions in One Year and Current Business Conditions which historically have provided a good leading indicator of future economic growth.
Personal finances recovered somewhat in June, with another positive reading in the Investment Return Indicator possibly playing a part. The increase in the Expected Personal Finances indicator, by 1.7% on the month, leaves it a little below the average of 2014, but provides a tentative sign that household balance sheets may be on the road to recovery. Note that the sharp gyrations in the stock market at the end of May prompted a more precautionary approach to savings with an increasing percentage of respondents selecting bank deposits as the wisest place for savings at the expense of local shares.
There were mixed signals across the spending data. Durable Buying Conditions were down 1.7% on the month following a 2.5% increase in May. There was, however, a significant increase in car buying sentiment with the Car Purchase Expectations Indicator increasing 3.3% to 100.1 in June from 96.9 previously, the highest since August 2014.
Commenting on the data, MNI Indicators Chief Economist Philip Uglow said, “There are certainly some positives that can be drawn from the June data particularly the more upbeat readings on business conditions. Sentiment, though, remains at a subdued level in absolute terms with interest rate cuts and other supportive measures yet to provide a significant boost.”
Westpac’s Senior International Economist Huw McKay said that “The scale and direction of the change in confidence is entirely consistent with the recent trend of incremental improvement in the official activity data. The level of confidence, which is 7.7% below average, reflects the ‘new normal’ of diminished growth expectations.” He noted further that “An increasing number of our respondents now assess that the stock market is ‘expensive’, which implies that the market may struggle to top 5000 again in the short run.”
