China consumer confidence firms

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Fresh from Westpac:

Capture•The Westpac MNI China Consumer Sentiment Indicator, hereafter the Westpac MNI China CSI, increased by 1.2pts from 111.1 in May to 112.3 in June, which is 0.3% lower than a year ago and 7.7% below the long run average. The absolute level of the CSI indicates that Chinese consumers are still anxious about their personal financial wellbeing. On the economy more broadly though, easier policy is beginning to impact. The June readings for current, 1 and 5 years ahead business conditions are all now higher than they were a year ago.

•Four of the five components that go into the calculation of the Westpac MNI China CSI increased in June. The major positive impulse came through in expected business conditions, as noted above, while current and expected family finances also moved higher, the latter by more. ‘Time to buy a major household item’ was the pessimistic outlier. Current business conditions (not part of the composite, but closely correlated with the PMIs & IP) increased by 3.3pts to be up 1.4%y/y.

•The previous headline result was biased lower by a dramatic shift towards pessimism among the 55-64 age group. Excluding this cohort, the Westpac MNI China CSI rose by 1.9pts in May. In June, there was a predictable bounce in the 55-64 group (& in the low income bracket), while the 18-54 cohort edged a further 0.2pts higher. Note that the May rate cut came near the end of the sampling period for last month’s survey, implying there may be some residual impact of that move captured in the June result. However, the sharemarket correction in the week ending June 19 occurred after the survey had closed.

•Investment preferences remain in net risk-seeking territory, but the reading is closer to ‘neutral’ than ‘aggressive’, with both domestic real estate and the share market attracting slightly fewer adherents in June. In a related development, a rising proportion of self-identified investors gauged equities as ‘expensive’, a prescient observation given the postsurvey correction. The proportion of income used for active investment fell, whereas the shares allocated to saving and servicing debt were both relatively steady.

•The employment indicator troughed in October 2014, having declined by a cumulative 11.3% from the May 2014 peak. Following a 0.4% gain in June, it has now lifted by just 2.5% from the trough. The latest reading is still 8.8% below average. Ergo, in absolute terms job security remains in short supply.

•The consumers’ attitude towards real estate (see table 3 on page 4) deteriorated modestly but on a broad front in June, thereby failing to build on the encouraging boost seen in May. The four major indicators, namely house price expectations; ‘good time to buy a house’; and the relevant components of ‘wisest place for savings’ and ‘motivation for saving’ all fell back a little from their May levels. This is somewhat surprising given the improvement in dwelling prices seen over April-May, particularly in the wealthier cities. We observe though that the Central & Western region was the main source of weakness, with the coastal area much more resilient, which makes sense given the uneven nature of property market fundamentals.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.