Westpac MNI China Consumer Sentiment Indicator Records Second Consecutive Increase - Views On Business Conditions More Optimistic

There was a small pickup in Chinese consumer confidence running into the end of 2015 although echoes of October’s downgrade remained, with respondents remaining cautious on all fronts.
 
The Westpac MNI China Consumer Sentiment Indicator rose 0.6% to 113.7 in December, holding 4 points above the series low reached two months earlier. Confidence among ordinary Chinese households has been relatively resilient in the face of the worsening in real economic conditions in 2015, but even so, sentiment over the year has trended downwards. The slew of supportive measures over the year, including the recent fiscal expansion have proved too light of a counterweight, with the average of the indicator down to 113.2 in 2015 from 115.2 in 2014. The average of the series, which began in April 2007, is 120.
 
The outlook for business improved again in December, building on last month’s rise. Business Conditions in One Year posted the biggest gain, at 1.9%, while Business Conditions in Five Years rose a more modest 0.9%. The business conditions measures in the survey contributed the most to October’s fall, highlighting the significant role that the evolving policy backdrop and general economy currently plays in shaping consumer sentiment. There was also an increase in the Current Business Conditions which along with Business Conditions in One Year has a strong correlation with industrial production.
 
Led by pronounced pessimism among 55-64 year olds, household finances fell back slightly with the assessment of the year ahead performing the worst. Current Household Finances declined 0.8% on the month, while the expectations measure was 1.1% lower. An increase in price dissatisfaction and expectations of heightened inflation, probably caused by the pickup in food prices in recent months, may have had some impact.
 
Despite the fall in finances, consumers thought December was a better time to buy a household good with the Durable Buying Conditions stirring from its recent lows. The assessment for buying conditions wasn’t shared across all product segments though; car buying conditions slumped while consumers didn’t plan to increase their spending on smaller household items in the near term. Similarly, consumers were mixed about the real estate market, although a greater proportion expected house prices to rise.
 
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, “While overall consumer sentiment remains at a low level, the continuing improvement in respondents’ views on business conditions suggests they believe that measures to boost growth will prove effective. And given the strong correlation between panellists' views on business and actual economic activity, the likelihood is that they’ll be proved correct.”
 
Westpac’s Senior Economist Elliot Clarke said that “It is notable that the proportion nominating that house prices would fall either slightly or sharply both declined from November. That implies that households see the downside risks on housing as having eased. The strengthening policy focus on the clearing of housing inventory, a key highlight of the CEWC, which should help to bolster housing sentiment in the first half of 2016, is probably a major factor at play here.”