Westpac MNI China Consumer Sentiment Rises Further In September - Consumers Brush Off Stock Market Declines With Sentiment Hitting Highest Level Since May 2014

In contrast to the global barrage of negativity surrounding China’s economic fortunes, ordinary Chinese consumers have become increasingly upbeat. Following a minor setback early in Q2, consumer confidence has been steadily improving since October’s trough last year and rose for the fourth consecutive month in September.

The Westpac MNI China Consumer Sentiment Indicator rose 1.5% to 118.2 in September from 116.5 in August, reaching its highest level since May 2014. The latest gain was broadly based with four of the five components of the headline indicator rising. Only Expectations for Household Finances declined in the month.

The September survey provided the first insight into how respondents view the latest stock market declines, with the previous survey period ending before the August equity fallout began. Much like the reaction to the July stock shakeout, the majority of consumers barely batted an eyelid. This is maybe not so surprising given that only around 11% of our urban dwelling respondents identify themselves as actually being invested in the market. The market is unlikely to be viewed as a bellwether for economic prospects either – the spectacular market surge in the year prior to the rout coincided with a continued weak growth for China by historical standards. 

Instead, households appear to have responded positively to recent policy developments, including: the rate cut in late August; the change to the yuan fix methodology; and SOE reform. Both measures of business conditions made solid gains in September with Business Conditions in One Year at the highest in nearly two years and the longer-term Business Conditions in Five Years also stronger.

Family balance sheets continued to benefit from the easier policy environment with the cumulative rate cuts since November beginning to flow through. This effect showed through in a further fall in the percentage reporting spending more than 50% of their monthly income on daily expenses and an improvement in leisure spending measures. 

Accompanying the rise in current finances, consumers warmed to the real estate sector in September. House Buying Sentiment rose, along with the proportion of respondents nominating real estate as the wisest place for savings. There was also an increase in those whose main motivation for saving was for a deposit on a property. The risk profile of consumers in general skewed to higher return options with the proportion of survey participants choosing stocks as the wisest place for savings increasing, despite a rise in the proportion who reported a loss on their stock market investment in September. Respondents perhaps judged that there was now some value in the market.

Commenting on the data, MNI Indicators Chief Economist Philip Uglow said, “Our cross-section of urban Chinese consumers seems oblivious to the tirade of negativity that surrounds China at the moment. Instead, consumer sentiment is at the highest in almost one and a half years, which is a boon for an already firm retail sector. While China’s traditional industrial growth engine is slowing, the growing consumer and service sector should help to underpin growth in the months and years ahead.”

Westpac’s Senior Economist Matthew Hassan said that “The Chinese economy remains a key source of concern for global investors. Once again though, the surveyed opinions of China’s consumers are showing a steady improvement. Remarkably, Chinese consumer sentiment is now only 1.7% below its long term average. Views around housing have also turned modestly positive. With consumption and housing increasingly critical growth drivers for China, how these trends unfold will continue to warrant close attention.”