China consumer confidence remains subdued, but expectations for business conditions rise
China’s consumer confidence remained subdued in June, but consumers’ expectations of business conditions showed some initial signs of recovery, according to the latest survey by Market News International (MNI) Indicators, a part of Deutsche Bourse Group.
The June Westpac China Consumer Sentiment Indicator (CSI) rose 1.1 per cent year on year to 112.3, which is below the 12-month average of 112.4 since last June, but slightly up from 111.1 in April and May, according to the survey released Wednesday.
Consumers’ views on business conditions led the rise in sentiment, “aided by May’s interest rate cut and some modest improvement in industrial production,” the survey says.
The current business conditions indicator, a sub-indicator of the CSI, rose by 3.2 per cent to 106.2 this month. Indicators of business conditions for one year and in five years also improved, which are leading indicators of future economic growth.
The survey was based on computer-aided telephone interviews with more than 1,000 respondents in 30 cities of all sizes across China.
A reading of 100 represents a neutral position in the indicator – above 100 indicates consumer’s increasing optimism on the state of the economy whereas reading below 100 shows increasing pessimism.
“We've seen a bit of levelling off in term of the declines,” MNI Indicators Chief Economist Philip Uglow said. “I think it's pointing to more of stabilisation.”
In the first quarter, China’s GDP grew at 7 per cent, it slowest pace in six years, and the central government cut the interest rate by a quarter of a percentage point in May, the third cut in six months. The rate cut led to consumers’ positive response to the business conditions both in short and long terms, according to the survey.
“The level of confidence reflects the ’new normal’ of diminished growth expectations,” Westpac's Senior International Economist Huw McKay said.
Consumers, however, remained cautious about China’s real estate market. Consumers’ willingness to buy homes reached its lowest this year as expectations for house prices over the next six months continued to fall in June. While the indicator for consumers’ willingness to spend money rose by about 3 points in June from May, the overall indicator for shopping was at 98.0, well below the 100 benchmark, showing more consumers were planning to curb spending.
The proportion of respondents who saved more than 30 per cent of their monthly income dropped slightly compared to May, but many still preferred bank deposits due to the volatile nature of the equity market.
Consumers appeared more reluctant to bet on A-shares. The stock investment indicator dropped 2 per cent in June to 106.9.
“An increasing number of our respondents now assess that the stock market is ‘expensive’, which implies the market may struggle to top 5,000 again in the short run,” McKay said.
The Shanghai Composite Index rose 2.19 per cent to 4,576.49 points yesterday.
