Chinese household sentiment recovered in March from the shock of the volatility seen in global markets in February, with our FTCR China Consumer Index clawing back some of the previous month’s drop. At 75.8, this was the second-highest reading in the history of the series and just below January’s record high of 76.4.
Consumers said their incomes improved again while their views on the economy’s performance were the strongest they have ever been. However, spending gauges softened, with consumers showing less enthusiasm for buying real estate and durable goods than they have in at least six months. Our discretionary spending sub-index was just above the average of the previous 12 months but nonetheless fell to a three-month low in March.
Better than expected economic growth has helped boost household sentiment over the past year but the government is continuing to tighten credit, including in the all-important housing market. Therefore, we do not expect sentiment levels to continue to forge new highs, and signs of cooling appetites for spending in our March survey could be harbingers.
This does not imply a sudden or sharp deterioration in sentiment among Chinese consumers, though their response to February’s market sell-off did highlight their susceptibility to falling asset prices. Measures of retail investor sentiment towards financial markets also recovered as asset prices stabilised. However, our survey was conducted before Friday’s plunge in Asian share prices on the back of headlines about a trade war between the US and China.
The FTCR China Discretionary Spending Index fell 1.2 points month on month to a three-month low of 77.4. However, our Discretionary Spending Outlook Index rose 1.7 points to 76.9, its highest level since December.
Our Household Income Index increased 2.3 points month on month to 79.5, short of January’s record high of 81.1. Our index measuring income expectations increased 2.2 points to 81, 0.3 points short of the record high in January.
Our Economic Sentiment Index recovered in March, rising 5.1 points to a record high of 78.9. The FTCR Economic Outlook Index rose 3.6 points from February to 84.9, just below October’s record high of 85.
Consumers reported that their cost of living moderated after the lunar new year holiday, estimating a 6.7 per cent year-on-year increase in March versus 8.4 per cent in February. They estimated their costs of living will increase 7 per cent over the next six months, in line with the previous month’s estimate.
Sentiment towards house buying, either to live in or for investment purposes, cooled in March, with our House Buying Sentiment Index falling to a 14-month low of 54.1 and our measure of sentiment towards investing in real estate tumbling 3.5 points to 47.1, the first sub-50 reading since last November. Consumers were also less positive on buying cars, clothing and watches and jewellery than they were in February, though sentiment towards both domestic and overseas travel improved slightly.
Our A-share Buying Sentiment Index, measuring whether consumers perceive it is a good time to invest in A-shares, rose 2.4 points month on month in March, recovering from February’s drop after markets calmed. However, tit-for-tat US-China trade actions led to a 3.4 per cent plunge in the Shanghai Composite index on Friday and investor nervousness about a new trade war between the world’s two biggest economies could mean fresh falls in April.
Among retail investors, 37.3 per cent said they planned to buy stocks in the next three months, up from 34.5 per cent in February, while buying sentiment towards funds and wealth management products, as well as towards P2P and insurance products, was also stronger than in February.
The FTCR China Consumer survey is based on interviews with 1,000 consumers nationwide. For further details click here. This report contains the headline figures from the latest Consumer survey; the full results are available from our Database.
FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and south-east Asia. Our team of researchers in these key markets combine findings from our proprietary surveys with on-the-ground research to provide predictive analysis for investors
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