From Westpac:
The Chinese economy remains a major source of concern for global investors. This anxiety is shared to some degree by Chinese households, but where foreign scepticism vis-à-vis growth prospects appears to be deepening on the back of weak business surveys and equity turmoil, consumers are tentatively marking up growth prospects, albeit from a very low level. With the consumer now a key engine in China’s evolving growth model, this incipient divergence demands very close attention.
There were two major ‘events’ during the sampling period: the CNY fix shock (Aug 11) and the Tianjin explosion (Aug 12). Both occurred beyond the midpoint of the survey period. In such cases the impact, if any, tends to be spread across surveys. In this instance, one event is ambiguous for confidence (the CNY) and one is undoubtedly negative (Tianjin). The renewal of equity market distress and the latest package of monetary easing came after the survey had closed.
Three of the five components that go into the calculation of the Westpac MNI China CSI increased in August. The positive impulse was strong across current & expected family finances and ‘business conditions next 12mths’. ‘Business conditions next 5yrs’ moved slightly lower, as did ‘time to buy a major household item’. Excluding the volatile 55-64yo cohort, the Westpac MNI China CSI rose 2.5pts to 116.9. That is up 3% from a year ago. That is the first positive y/y reading for the 18-54yo cohort since January 2014.
The employment indicator was the pessimistic outlier in the July survey, recording a discomforting drop that raised concerns about downside risks in the labour market. Those concerns have been partially alleviated by a decent rebound in August. Even so, while so ever job security remains in short supply we remain on the alert for further monetary and fiscal easing. That is the only sensible position to take given the primacy of full employment in the leadership’s policy calculus. Our long held view that additional monetary easing was in the pipeline was partially met last night – however, we still see a minimum of a further 50bps in interest rate cuts to come.
A month ago, we cautioned against “a naïve extrapolation of the somewhat more positive recent trend in the official data” on the basis of soft outcomes for both current business conditions (not part of the composite, but closely correlated with the PMIs & IP) and the labour market. This proved to be sound advice on the basis of the weak July export and IP outcomes.
The consumers’ attitude towards real estate (pg 4 of the article) improved in August, on balance, building on cumulative gains dating back to November 2014. Of 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’, two increased, one fell markedly & the other was flat. Interestingly, it was ‘wisest place for savings’ that fell away, despite price expectations firming and a genuine ‘risk seeking’ move in households’ overall portfolio construction.
Finally, in relation to specific spending plans, discretionary outlays on services viz. entertainment, dining out at traditional restaurants and western style fast food, the culinary items rose while entertainment fell back a little after its July surge. Expected outlays on shopping increased 2% in the month, but they are down 3.8%y/y.
Perceived buying conditions were generally softer, with cars, major household items, and smartphonesshedding altitude, while IT products and “other appliances” went against the flow.
13.2% of respondents indicated that their family plans to buy a car in the next 12 months, versus the long run average of 13.3%. The proportion indicating that they had made an online purchase in the last three months edged up to 55.6%, solidly above the 54.4 recorded a year ago.
Full report.
