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Despite equity rally, confidence subdued in China

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Note: AstunningequityrallyandaseriesofeasingstepsfromthecentralbankhasdonelittletoemboldenChineseconsumers.TheWestpacMNIChinaC
A stunning equity rally and a series of easing steps from the central bank has done little to embolden Chinese consumers.

The Westpac MNI China Consumer Sentiment Indicator held steady this month at 111.1, after falling from 114.7 in March. The level is below the 12-month average of 112.4.

With the economy in a broad slowdown, perhaps this shouldn't be surprising. "Consumer confidence has declined throughout much of the last year along with deterioration in the economy," MNI says.

But Beijing played a key role in propelling the stock market higher in the last year, likely in an effort to create a "wealth effect" and help aid the economy.

Details of the report bear out some success on this front: lower income households, who are less likely to be involved in the equity market, reported a 3.1 per cent decline in confidence, but higher income households reported a 2.8 per cent increase.

Plus, a record 7.8 per cent of consumers said that local shares "were the wisest place to keep their savings." (The worrying aspect of that line can be dealt with later).

But where's the ripple effect? Consumers "turned less optimistic about future business conditions," the survey noted, and the component tracking the one-year outlook is now "back to the level recorded before the authorities began cutting interest rates in November."

Current conditions and the five-year outlook also registered declines, while confidence among people aged between 55 and 64 even hit a record low. (Everyone between 18 and 54 was feeling better, however).

In short, the stock market might be up but it's the broader economy weighing on the minds of ordinary people. Efforts from the People's Bank of China have helped to stabilise sentiment, but that might be it.
 
 
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