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Consumers seemingly underwent a reality check inJune as the Westpac MNI China Consumer Sentiment Indicator fell sharply to the lowest level in nearly a year, in spite of signs that measures taken by the Chinese authorities have stemmed the decline in growth.
The Westpac MNI China CSI fell 7.1% to 112.6 in June from 121.2 in May, as consumers reported a broad based hit to confidence. While sentiment remained above the breakeven 100 level, meaning that optimists still outnumbered pessimists, confidence has not been this low since July 2013.
Of the five components that contribute to the Westpac MNI China CSI, three fell to the lowest level since the series began in April 2007. Expectations for Business Conditions in 5 Years hit sentiment the hardest, falling to 126.4 in June from 137.7 in May. Business Conditions in One Year and the Durable Buying Conditions Component also fell sharply, with the latter hovering only just above the 100 level that separates optimists from pessimists.
Households’ perceptions of their Personal Finances were also hit, with both Current and Expected Personal Finances falling 7.5% and 6.9% respectively. Respondents were particularly concerned about their family expenses likely due to the recent increase in consumer prices, particularly food prices.
While general levels of confidence declined, consumers remain unperturbed by the weakening in the housing market exhibited in other data, possibly helped by action already taken by central and local governments to underpin the market. The House Price Expectations component, which measures theoutlook for prices over the coming six months, increased to the highest level for more than threeyears in June.
Commenting on the data, Chief Economist of MNI Indicators Philip Uglow said, “While some indicators point to a stabilisation in economic growth, consumers don’t see it lasting for long, with future expectations for business conditions hitting a record low. The survey has a strong track record as a reliable gauge of the future path of the economy and cautions against becoming overly optimistic that China is past the worst.”
Westpac’s Senior international economist Huw McKay commented that “Chinese consumers have reconsidered the more upbeat posture they assumed in May. While optimists continue to outnumber pessimists by a comfortable margin, precautionary savings are again on the rise as a proportion of income, with consumers now assessing that their own finances are on somewhat shakier ground.”
“Notwithstanding these results, consumers are still positive about the six month outlook for house prices and they collectively gauge that it remains a ‘good time to buy a house’ on net. The latter situation contrasts directly with the perceived wisdom of the analyst community at present and accordingly requires careful watching over the coming months”,he added.
