Westpac MNI China Consumer Sentiment Survey December 2016

Chinese consumer sentiment lifts.

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Westpac MNI China CSI: 116.6, +1.5%mth, +2.5%yr.

Gradual underlying improvement continues.

The Westpac MNI China Consumer Sentiment Indicator rose 1.5% in December, reversing most of November’s 1.9% decline. At 116.6, the Indicator is up 2.5% on a year ago but still below its long run average of 120.

Four of the five components rose in December. Views on personal finances showed slightly better gains, ‘family finances vs a year ago’ up 2.8% to a 2½yr high and ‘family finances next 12mths’ up 4.1%. Consumer assessments of business conditions showed more muted gains ‘business conditions, next 12mths’ up a solid 2.6% but ‘business conditions, next 5yrs’ up just 0.6% and still more than 8% below its long run average. ‘Time to buy a major item’ was the only component to decline, falling 2.6% but coming from off a 6yr high in Oct – the index is still comfortably above its long run average.

Current business conditions reportedly softened slightly, the ‘business conditions vs a year ago’ index dipping 0.3%. Note that this index is not part of the headline composite but is highly correlated with other measures of industrial activity.

The employment indicator rose 1.1% but remains at a weak level overall after softening in the second half of the year. The index is down slightly on this time last year.

Consumer attitudes towards real estate improved, the housing composite posting a solid 3% gain. Consumers’ house price expectations lifted a further 2.5% but assessments of ‘time to buy’ dipped –0.4%. The proportion of consumers reporting ‘house purchase’ as their primary ‘motivation for saving’ jumped to 15.6%, the highest on records back to mid 2014.

Consumers’ purchasing plans posted solid gains although assessed buying conditions were mixed in the month. Expected spending on shopping rose 3.4% with planned spend on entertainment and dining posting smaller gains. Perceived buying conditions were steady in the month but are up markedly on year ago levels for all categories and in most cases near or slightly above long run averages.

Responses on savings motivations and investment preferences continue to show a risk averse tone albeit with a slight relaxation in December. Over 70% of consumers still nominate potential loss of income, education, health and retirement as the main reasons for saving with nearly 60% still favouring ‘safe’ options for investment.

The main theme for the Chinese consumer in 2016 has been one of gradual improvement. While there have been several setbacks along the way and progress has at times been disappointing the picture at year end is of a more comfortable consumer. It’s been a similar story for the wider economy, with gradual gains but no ‘break out’ moves associated with a lift to outright strength. Looking to the year ahead, public sector activity is expected to support growth ahead of November’s all-important 19th National Congress. With private sector investment still subdued and question marks around the export environment, the Chinese consumer is likely to again be a key swing factor for the wider economy.

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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