Westpac MNI China Consumer Sentiment Indicator Up From Record Low

According to the latest Westpac MNI report consumer confidence in China has regained some ground in November following October’s plunge. Consumers were increasingly optimistic about the outlook for long-term business conditions and confidence in the labour market edged higher.

The Westpac MNI China Consumer Sentiment Indicator rose 3% to 113.1 in November, having fallen sharply to a record low of 109.7 in the previous month, with the rate cuts in late October and the accompanying fiscal expansion possibly boosting sentiment. All sub-categories that make up the indicator gained ground, although none fully recovered to September’s levels.

The rise in sentiment was led by increased optimism about future business conditions, while respondents were also more upbeat about the current state of business following October’s downbeat assessment. Respondents were also increasingly optimistic about the outlook for their household finances, and buying conditions for large durable items turned slightly more favourable, although remained weak. This was accompanied by gains in all measures of expected ‘discretionary’ spending, led by a more positive outlook for shopping and entertainment spend.

The improved outlook for business conditions and household finances was also reflected in an improvement in labour market sentiment. The Employment Outlook Indicator increased for the first time in four months, edging up to 95.2 in November, although still below the breakeven level of 100.

In spite of a more supportive policy environment for real estate, House Price Expectations fell for the third consecutive month, although it remains relatively high in level terms. Real estate also lost some ground as a preferred destination for savings, although consumers remained positive about participating in the property market, evidenced by a rebound in buying sentiment.

Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, “The recent round of rate cuts appears to have helped push consumer confidence up from the record low seen in October. Sentiment, though, is significantly down from the September high. Up until October respondents had appeared resilient in the face of a barrage of economic bad news, but subsequent weaker sentiment readings have shown consumers are not fully insulated from the wider economic slowdown.”

Westpac’s Senior Economist Matthew Hassan said, “The lift in sentiment is a welcome development. Although we viewed last month’s sharp drop as mainly an overdue correction bringing Chinese consumer confidence more in line with the softer tone coming from other economic data, there was a risk that sentiment could have gone on to register a deeper shock. A timely easing in policy appears to have helped spur this month’s rally. A more stable financial market backdrop, the end to China’s ‘one child’ policy, and the timing of the survey, conducted in the run-up to the Single’s Day online spending splurge, may also have helped. Despite these positives, Chinese consumers are clearly still cautious about the outlook for the economy and anxious about the implications for jobs. Sentiment around housing remains a notable positive but even here we are wary of recent slippage and what this may mean for a recovery that has yet to show convincing signs of broadening and strengthening.”


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