Chinese consumer sentiment picked up in June, partially reversing May’s fall and adding to evidence that increased policy support continues to trickle through to the real economy.
The Westpac MNI China Consumer Sentiment Indicator rose 1.5% to 115.9 in June. Sentiment has been somewhat volatile in recent months as efforts by the authorities have struggled to gain real traction, although the broader trend suggests that confidence has settled above the lows reached late in 2015. Over the quarter, sentiment averaged 116.0 in Q2, up from 114.8 in Q1, the highest outturn since Q3 2015.
Between May and June, four of the five components of the headline indicator increased, with measures of household finances outperforming while the long-term outlook for business was the only component to decrease on the month.
Following a significant setback in May, the Current Personal Finances Indicator gained 3.3% to 107.7 while Expected Personal Finances rose 2.8% to 116.0. Household finances showed the highest sensitivity to the decline in economic conditions in 2014 and despite the latest rise, have been range bound ever since.
The increased pressure on household incomes has manifested itself in a more risk averse approach towards savings and investment decisions. 60.9% of respondents said the wisest place to keep savings was a bank account, the highest in the series’ two-year history while 16% nominated real estate, the next most popular destination. Wealth management products, which accounted for 24.8% of responses in November last year fell to just an 8.9% share in June, the lowest since the series began.
Consumers’ assessment of business conditions firmed in June, led by a 4.9% jump in the perception of Current Business Conditions to 111.1, the highest since May 2014. The increase here is maybe the clearest sign that stimulus measures are starting to be felt given the indicator’s strong correlation with activity in the real economy. In tandem there was a significant increase in respondents’ views on their employment outlook.
On a weaker note, as cracks appeared in the recovery in official data for the housing market, consumers pared their enthusiasm towards buying a house and expectations for house prices slipped. This left the Real Estate Investment Indicator down 0.7% to the lowest since April 2014.
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, “June’s broad based increase in sentiment and more positive showing in Q2 suggests that stimulus measures may well be having some impact. Significant risks remain though, with cooling attitudes towards real estate and respondents becoming significantly more risk averse in their attitudes towards saving in recent months.”
Westpac Senior Economist Matthew Hassan said, “While the headline gain may be a bit underwhelming and there are some softer signals around housing and savings behaviour, there are some notably positive aspects to the June survey detail. In particular, the improvement in views on employment could act as a significant catalyst. Consumers tend to put major financial decisions on hold when job loss fears are elevated. Conversely, as these fears start to ease, pent up demand can come through, giving a significant lift to economic momentum. Whether the rally in employment expectations is sufficient to trigger this sort of pick up remains to be seen but certainly it’s a promising step in the right direction.”
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Westpac MNI China Consumer Sentiment Indicator Ticks Higher In June - Rebound In Confidence As Stimulus Measures Flow Through
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