Westpac MNI China Consumer Sentiment Indicator Scales Back In July - Consumers Less Positive Across A Wide Range Of Sentiment Measures

Confidence among Chinese consumers eased slightly in July as respondents grew more nervous about their personal finances, amid renewed weakness in the labour market, with a growing proportion opting to refrain from purchasing big ticket items.
 
The MNI China Consumer Sentiment Indicator fell by 1.6% to 114.0 in July from 115.9 in June as sentiment across all components pulled back. While sentiment remains above the 100 breakeven level, meaning optimists outnumber pessimists, it still lies below the series average of 119.7.
 
All five components of the Westpac MNI China CSI fell between June and July, with measures of both current and future household finances and Durable Buying Conditions having a more pronounced downward impact. The across the board decline in sentiment was driven by a 2.9% fall in Durable Buying Conditions, having risen slightly in the previous month. Furthermore, this downbeat sentiment is consistent across the other spending data. There was a noticeable decrease in car buying intentions with the Car Purchase Expectations Indicator falling below the 100 breakeven level for the first time since February.
 
Consumers were slightly less optimistic about their household finances now and in the future. Household finances fell noticeably with Current Personal Finances down 2.3% on the month to 105.2 and expectations for the future falling 1.9% to 113.8. The weakness has come in tandem with a decline in respondents’ views about the job market. The Employment Outlook Indicator dipped to 98.3 in July – last month’s foray back to expansionary territory for the first time in almost two years proving short-lived.
 
The two business conditions components, which measure expectations for one and five years ahead, declined by a smaller magnitude in July. Business Conditions in One Year declined 0.7% to 117.5 from 118.4 in June while Business Conditions in Five Years eased to 131.3 from 132.0. While not a component of the overall Consumer Indicator, the Current Business Conditions Indicator picked up, rising to the highest level since January 2014, as consumers continued to see a positive impact from the authorities’ actions to stimulate growth.
 
Meanwhile, partly reflecting the UK's EU referendum results, sentiment towards the stock market, which had been broadly recovering since the end of the first quarter, also suffered a setback in July. The Stock Investment Indicator plunged 7% to 97.6 in July from 104.9 in June.
 
Commenting on the latest survey Senior Economist of MNI Indicators Andy Wu said, “There are certainly a lot more negatives than positives that can be drawn from the July data, particularly the more downbeat readings on personal finances and the outlook for jobs. While our sister China business survey shows a general continuation of the improvement in confidence, the slight softening in consumer confidence cautions about getting too optimistic over the outlook for the second half of the year.”
 
Westpac Senior Economist Matthew Hassan said, “While overall the fall in sentiment is not large it again casts doubt about the sustainability of recent improvements. Up until April there appeared to be a convincing upswing in confidence taking hold and spreading from expectations to more tangible improvements in current business activity, buying intentions and labour market conditions. The uptrend has lost its way since then and although consumers continue to report improving business conditions they appear less confident that gains will be sustained and less inclined to spend. Whether Chinese consumer confidence weakens further or regains its upwards momentum in the months ahead will be a critical factor for economic activity, particularly while export sectors and investment activity remain soft.”