Westpac MNI China Consumer Sentiment Index
The Westpac MNI China Consumer Sentiment Indicator, hereafter the Westpac MNI China CSI, decreased by 3.6pts in April, printing 111.1 versus 114.7 in March, –3.1% over the month and –5.3% over the year. The April outcome is 8.7% below the long run average. The absolute level of the CSI indicates that Chinese consumers are still anxious about their personal financial wellbeing and the economy more broadly.
Each of the five components that go into the calculation of the Westpac MNI China CSI decreased from their March levels. The major negative impulse was a steep decline in current and expected family finances, which more than reversed March’s rate-cut infused gains. Forward looking assessments of business conditions also declined, but to a lesser extent. Current business conditions (not part of the composite, but highly correlated with the PMIs and IP) were a touch firmer. The post Lunar New Year rate cut has clearly faded from the minds of consumers already, just as the November 2014 cut failed to inspire anything more than a one-month knee jerk gain.
Investment preferences tilted in a risk-seeking direction in April. Both domestic real estate and, naturally, the booming share market, attracted a greater share of adherents than in March. However, the scale of these gains is relatively small, implying there remains plenty of room for a rebalancing of portfolios towards these asset classes. For now though, there is little sign that the spectacular gain in share prices is having more than a marginal impact on the conservative financial mind-set of the ordinary Chinese citizen. See page 8 for a range of insights on the booming equity market.
The employment indicator declined by a cumulative 11.3% between May and October 2014 and has since gained just 2.2%. The April reading (–1.1pt from March) is 9.1% below long run average. Ergo, in absolute terms job security remains in short supply. Consumers are awaiting a more durable pick-up in growth before they fundamentally reassess the job outlook. We noted a month ago that the softer employment reading argued that the observed improvement in family finances was highly dependent on the interest rate cut. The weak aforementioned update on family finances validates that position.
The consumers’ attitude towards real estate was mixed in April, following on from the modest cumulative improvement in Nov-Mar. Expectations for house prices declined; but the share of respondents reporting it was a ‘good time to buy a house’ moved higher; while more consumers nominated domestic real estate as the ‘wisest place for their savings’. Back on the negative side, the proportion of consumers nominating a housing purchase as their primary motivation for saving fell modestly, following on from four straight gains. We interpret these outcomes as somewhat disappointing, given the increase in max LVRs, which we hoped would produce a more definitive positive overall read. However, we note a) the firmer March official house price figures, b) that survey respondents expect listed real estate firms to perform well, and c) that policy has been eased further since this survey was taken. Will it be a case of delayed gratification?
Author Huw McKay Wesptac's Senior International Economist
Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately achieved may differ substantially from these forecasts. - See more at: https://businessfocus.westpacgroup.com.au/blog/2015/march/25/westpac-mni-china-consumer-sentiment-index/#sthash.WV7kfzkY.dpuf