If you thought the chaos in China’s stock market – let alone concerns about the economy – would have a negative impact on Chinese consumer sentiment you’d be dead wrong.
It just hit the highest level since May 2014.
The latest Westpac-MNI China consumer sentiment index jumped by 1.8% to 116.5 in August with “small falls in durable buying conditions and business conditions in five years outweighed by sizeable increases in both current and expected household finances and business conditions in the year ahead”, according to the report.
Recent developments in the survey’s subcomponents are shown in the table below.
While international investors fretted over the daily gyrations in China’s stock market, that wasn’t the case domestically with a perceived improvement in household balance sheets – partially in response to improved sentiment towards the labour market and price pressures – along with that towards current business conditions which hit the highest level since July last year – helping sentiment rise to the highest level seen in 16 months.
The report also noted that there was a disparity between upper and lower income families with confidence among those those earning less than 96,000 yuan per annum seeing confidence increase sharply while that for higher income families – those earnings above 96,000 yuan – falling to the lowest on record.
The report points to a generous lift in the minimum wage in many provinces this year, along with a renewal of corruption related arrests – something that may have unsettled some higher income earners – may explain the divergence in confidence levels.
Although a strong outcome the survey was conducted before the recent yuan devaluation, and the port explosion in Tianjin, something that may impact sentiment levels in the upcoming September survey.
With expectations for the nation’s stock market turning positive in the August survey, there is a risk that sentiment may decline given recent events.
Despite this, Philip Uglow, MNI Indicators chief economist, believes consumer conditions are improving.
“The unambiguously positive result in this month’s survey reaffirms our view that consumer conditions are well and truly on the mend following some weakness earlier in the year. The cumulative increase in recent months is confirmation that the majority of Chinese consumers have been left unscathed by the volatility in stock prices”, he noted.
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