Westpac MNI China Consumer Sentiment Survey November 2016

Chinese consumer sentiment slips.

Westpac MNI China CSI: 114.9, –1.9%mth, 1.6%yr.

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Renewed concerns about business outlook and job security.

The Westpac MNI China Consumer Sentiment Indicator slipped back in November, dipping 1.9% to 114.9 from 117.1 in October. The decline follows a promising lift in the previous two months that started as a rebound from a weather-affected low in August. Stepping back from recent monthly moves, sentiment remains stuck well below its long run average of 120.

All components retraced in November. The biggest pull back was in ‘time to buy a major item’ which fell 3.5% after having surged 10% to a six year high in October. Consumer assessments of ‘business conditions, next 5yrs’ declined 2.9% to the fourth lowest read on record. Views on personal finances were also softer, ‘family finances vs a year ago’ down 1.5% and ‘family finances next 12mths’ down 2.5%. ‘Business conditions, next 12mths’ was more stable, slipping just 0.8% and still up slightly on a year ago.

Current business conditions reportedly improved, the ‘business conditions vs a year ago’ index up 1.8%. Note that this index is not part of the headline composite but is highly correlated with other measures of industrial activity.

The employment indicator declined 2.5% to be back below the average recorded over the last 2yrs. The persistent job loss fears over this period are clearly still not lifting.

Consumer attitudes towards real estate had a mixed month, the housing composite ticking up slightly by 0.2% overall. Consumers house price expectations continued to firm (+2.5%) but assessments of ‘time to buy’ dipped back (–1.1%).  The proportion of consumers reporting ‘house purchase’ as their primary ‘motivation for saving’ lifted back over 10% and the proportion nominating real estate as the ‘wisest place for savings’ posted a similar gain to 18.4% .

Consumers’ pulled back on purchasing plans with assessed buying conditions also downgraded. Expected spending on shopping, entertainment and dining were all down in the month and on year ago levels. Perceived buying conditions deteriorated for most categories (autos the only exception) but were still above readings this time last year for nearly all categories (‘other appliances’ the only exception).

Responses on savings motivations and investment preferences continue to show a firmly risk averse tone. Nearly 80% of consumers nominate potential loss of income, education, health and retirement as the main reasons for saving. Meanwhile, over 60% favour ‘safe’ options such as ‘pay down debt’ or bank deposits as the ‘wisest place for savings’.

Overall, while the November sentiment fall is not overly large it is another disappointing result. The gradual improvement in the consumer mood over the last two years, from extreme lows in late 2014, seems to again be losing its way. With confidence still materially below long run averages and consumers still concerned about job security and the economic outlook, China’s consumer recovery is clearly still fragile.

Matthew Hassan Senior 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.

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