New | China consumer sentiment declines slightly in January as jobs, real estate outlook weighs
"Consumers entered 2015 on a softer note with confidence slipping back from an already low level, highlighting the weak level of domestic demand in China" - MNI Indicators Chief Economist Philip Uglow
Chinese consumer sentiment declined slightly in January, as confidence in jobs and the real estate outlook remained subdued while spending on durable goods fell to a record low.
The Westpac MNI China Consumer Sentiment Indicator dropped to 112.1 in January, near the record low seen in October last year, and reversed a December rebound.
Households had a weakening assessment on their current financial position, although they were more optimistic about personal finances over the coming year. The Durable Buying Conditions indicator fell to a third record new low in four months.
The indicator reflects “a difficult year for the domestic economy,” the Westpac Institutional Bank and Deutsche Boerse, which compiles the MNI gauge, said in a joint statement.
"Consumers entered 2015 on a softer note with confidence slipping back from an already low level, highlighting the weak level of domestic demand in China," MNI Indicators Chief Economist Philip Uglow said.
Uglow said the rising confidence on future personal finances was probably linked to recent rate cut.
China’s central bank cut benchmark interest rates for the first time in November, spurring expectations that monetary policy, while still dubbed as “prudent” in official statements, has actually become more accommodative.
The People’s Bank of China has vowed to maintain an “appropriate”, neither too tight nor too loose, tone for monetary policy. It has also been adding liquidity to selected financial institutions for them to support the rural and weak small firms.
China’s economic growth eased to its slowest pace of growth in 24 years at 7.4 per cent, missing the annual target at about 7.5 per cent.
In 2014 as a whole, the MNI sentiment gauge decreased by 10 per cent.
Attitudes towards real estate were generally weaker in January, as expectations for house prices showed a minor fall while a lower share of respondents thought it was a good time to buy a house.
However, a rising proportion, or 19.3 per cent, of respondents believed that real estate was the “wisest place for savings” in January.
The weak sentiment “indicates that Chinese consumers are still relatively anxious about their own personal financial wellbeing and the economy more broadly," said Westpac’s Senior International Economist Huw McKay.
“However, the pronounced pessimism that dominated much of 2014 has clearly lessened in recent months, with the shift in the policy stance the proximate cause,” McKay said.
Economists are still predicting further rate cuts this year, albeit at a slightly later date.
Mizuho Securities’ economist Shen Jianguang said targeted policy tools will likely replace rate cuts or a reduction in banks’ reserve requirement ratio in the first quarter, partly in a bid to prevent sharp volatility in the equity market.
