Chinese consumer sentiment increased sharply in March in a broad based improvement which saw greater optimism toward personal finances, the housing market and buying conditions.
The Westpac MNI China Consumer Sentiment Indicator rose 6.1% to 118.1 in March from 111.3 in February, its highest level since September 2015. Confidence has been hit in recent months following financial market volatility and concerns over China’s slowing economy, but the latest rise is on a par with the high seen in September last year and the second highest reading since May 2014.
All five components of the headline indicator increased in March, led by significant gains in Current Household Finances and Durable Buying Conditions, with a larger number of respondents citing higher income as the reason for the improvement in their finances. There was also a pick-up in Expected Household Finances, albeit slightly smaller.
Buying conditions for IT products, phones and appliances all picked up in March, in hand with a further improvement in car buying sentiment. The Car Purchase Indicator increased for the third consecutive month to the highest since May 2014. Optimism here was tempered by mixed signals from measures of leisure spending. Notably, the Shopping indicator, which has a high correlation with official retail sales data, turned further south following a lurch lower in February.
The PBOC's latest RRR cut and the Chinese authorities' commitment to support growth at the March NPC, were at least in part behind a more optimistic outlook for the economy. The Business Conditions in One Year Indicator rose sharply to stand at the highest since December 2013 while Business Conditions in Five Years and Current Business Conditions also picked up. Despite wider optimism on the economy, the Employment Outlook Indicator showed a more muted improvement and remained at a relatively weak level overall.
Sentiment on the housing market improved, with house price expectations rising further and house buying sentiment pushing back above the 100 neutral level for the first time since May 2014. This was coupled with a significant increase in the proportion of respondents citing house purchase or down payment as the main reason they were saving.
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, “The sharp increase in the Westpac MNI China Consumer Sentiment Indicator to the highest in six months shows that while down, the Chinese consumer is definitely not out. Respondents appear to be increasingly confident that the authorities will be able to successfully steer the economy through the current torrid waters.”
Westpac Senior Economist Matthew Hassan said, “The rebound in Chinese consumer sentiment is a welcome result, particularly given the more central role consumer demand is now playing in driving growth in China. That said, there is still a clear note of caution in the March survey results. Much of the improvement in sentiment still hangs on an expected turnaround in weak business conditions that has so far failed to materialise. Meanwhile labour market concerns also look to be lingering and are likely to remain an inhibiting factor for demand."
