As Stronger Outlook Offsets Weaker Current Conditions
SHANGHAI, China, July 25 /Xinhua-PRNewswire/ -- Xinhua Finance eziData China Consumer Confidence Index (CCCI) was updated today, with the survey results showing a slight rebound in Chinese consumer confidence in July, as a jump in future expectations offset continued deterioration in sentiment over current conditions.
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The Index rose 0.4 point to 102.0 in July, but remained slightly below the 102.2 reading in May.
The relative stability in July resulted from a series of sub-trends -- including steadily rising food prices, rebounding housing prices and fluctuating stock market prices -- that tended to counteract each other.
Under the support of the Xinhua Finance family, Xinhua Finance eziData China Consumer Confidence Index is produced monthly by eziData, a local provider of China consumer data, and in association with Dr. Richard Curtin. Dr. Curtin is Research Professor and Director of the Consumer Sentiment Surveys at the University of Michigan's Institute of Social Research. The survey this month was conducted through 1,546 telephone interviews from July 1 to July13. April 2007 survey results are set as the benchmark value of 100. More on the survey methodology can be found in the accompanying section.
Current conditions eased 1.2 points to 100.2 in July, the second consecutive monthly decline, under the direct influence of rising concern on consumer prices and lower stock market returns. The decline was led by current personal finances, which fell 4.6 points to 122.2. Despite this, sentiment on whether it was a good time to buy higher-cost durable goods like furniture and appliances rose 2.1 points to its highest level in the four-month history of the index. A rising desire to own a car was offset by an even stronger increase in expectations for higher gasoline prices.
In contrast, future expectations rose by 1.3 points to 102.9 in July, led by gains in both the one-year business outlook (3.1-point rise) and five-year business outlook (3.5-point rise). On the other hand, expectations on personal finance in one year fell for the second month in a row (down 1.3 points), affected by the declining sentiment on current personal finances.
The gain in confidence in July was due largely to improved sentiment among the youngest group surveyed, those 20-34 years old (+1.1 points). Sentiment among both middle-aged (35-54 years old) and older (55-64 years old) consumers, who tend to be more sensitive to changes in food, housing and stock market prices, was basically stable.
The stability of overall sentiment for middle-aged and older consumers masked differing trends based on a combination of age and income. For older people who make less than RMB 48,000 per year, the continued rise in general prices, particularly for food, has had a strong negative impact on their lives. However, for middle-aged consumers who make more than RMB 48,000 per year, the drop in current conditions was due largely to lower investment returns.
Regional Trends
Consumer sentiment showed strong regional differences in July. While sentiment in the northern and central parts of East China declined by 1.3 and 1.6 points, respectively, it climbed 1.1 and 2.9 points in the southern part of East China and in Middle & West China. Changes in views on food prices and house prices, as well as stock market prices, have contributed to the above trends.
In the northern part of East China, the decline was led by a 2.1-point drop among older consumers and a 1.7-point drop among the middle-aged. While overall sentiment among the younger generation inched down only 0.4 point, a larger drop was seen among those with lower incomes.
Although current conditions in this region fell only 0.3 point, current personal finance (down 2.8 points) has been severely undermined by rising prices and lower investment returns. The decline was however offset by a rise in durable purchase sentiment, which was probably due to the fund flow back from stock market investment. The expectations index, however, tumbled 1.9 points, led by concern among the higher-income group that the recent strong rise in housing prices might hurt longer term conditions in the area, particularly in Beijing.
The central part of East China showed a decline in current conditions by 3.6 points -- led by a 6.8-point plunge in current personal finance -- and in the future outlook by 0.5 point. Sentiment among the middle aged fell by 3.8 points, led by a plunge in sentiment among Shanghai consumers. Confidence also dropped among the younger generation, while sentiment among the oldest rebounded by 2.9 points after a 7.3-point drop in June.
The decline in the current conditions in this region was also a result of higher prices and lower investment returns, which particularly affected the middle-aged consumers. Interestingly, although home prices rose again, consumers were somewhat indifferent as prices have been at high levels in the area for quite some time. The future outlook was not significantly affected by this factor.
Similarly, the 2.8-point drop in current conditions in the southern part of East China was also led by middle-aged and older consumers. However, with the 10-year anniversary of the return of Hong Kong to Mainland China being celebrated during the month, neighboring southern China turned more optimistic about the area's future, resulting in a 3.2-point gain in the expectations index and so a slight increase in overall sentiment. However, the more buoyant outlook did not reach all consumers: confidence among the older group, who are not as involved in economic activities, showed a 9.4-point plunge in July.
Middle & West China was the only region where both current conditions and the future outlook increased in July (by 1.9 points and 3.4 points, respectively). The latter was led by an 8-point gain in five-year business outlook. At the same time, trends within age groups tended to reconcile. Sentiment for both young and middle-aged consumers rose more than three points, while that of the older group gained 1.8 points.
In Middle & West China, the rise in current conditions was also due largely to the rise in the large durable purchase sentiment. More noteworthy was the sharp gain in the future outlook -- this area had an advantage of being at a lower level of development than the east, and its people were filled with universal confidence on the future. Although housing prices also continued to rise rapidly in Middle & West China, and consumers say that current homes are too expensive, the relatively lower prices compared to other parts of the country caused consumers to want to invest in the real estate market. Expectations of a profitable return on housing investment contributed to the rise in the overall outlook for the region.
Trends in Major Cities
Consumers in Beijing and Shanghai were less confident in July than in June, while their counterparts in Guangzhou were more optimistic.
Sentiment among Beijing consumers plunged 4.2 points to 97.8, the lowest level in the index's history. Current conditions (-2.0 points) and expectations (-5.4 points) also dropped to their lowest level in four months.
Sentiment on current household finances varied by income group. For families making less than RMB 48,000 per year, the sharp drop was probably due to rising consumer prices. While sentiment on current finances among those making more than RMB 48,000 per year remained relatively stable, the five-year outlook on business conditions declined sharply. Over the past four months, sentiment on long term business conditions in the higher income group has fluctuated significantly, reflecting uncertainly about business conditions after the Olympics. Many expressed concern that the current pre-Olympic economic boom, particularly the run-up in local housing prices, will come to an abrupt halt after Games end in August next year.
Sentiment among Shanghai consumers dropped 4.4 points in July, as a sharp 6.8-point decline in current conditions more than erased the gains posted in the last two months. The expectations index declined 3.1 points. The recent fluctuations in the stock market, combined with the rise in consumer prices, led to a sharp drop in the one-year outlook for personal finances. Shanghai consumers also expressed concern that high home prices would potentially weaken the economic development of the area. In addition, after a long period of ineffective government policies, Shanghai consumers were less optimistic about future housing prices, causing a drop in the five-year outlook for business conditions.
In contrast to Beijing and Shanghai, Guangzhou consumers were much more optimistic in July, with the overall sentiment index gaining 4.0 points to 102.9. Sentiment on current conditions rose a modest 0.4 point, while future expectations jumped 6.0 points. Significant rises were posted in both the one-year personal finance outlook as well as the one-year and five-year business outlooks, with no major differences between income groups. As the 10th anniversary of the return of Hong Kong to Mainland China may have posed a major impact on the above changes in July, the survey result of August would help further clarify the trends within this area.
Apr. May Jun. Jul.
2007 2007 2007 2007
INDEX OF CONSUMER SENTIMENT
ALL CHINA 100 102.2 101.6 102.0
EAST CHINA 99.8 102 102.1 101.5
EAST CHINA: NORTH 100.2 101.1 102.1 100.8
EAST CHINA: CENTRAL 100 101.5 102.1 100.5
EAST CHINA: SOUTH 99.4 103.2 102 103.1
MIDDLE & WEST CHINA 100.6 102.8 100.2 103.1
INDEX OF CONSUMER SENTIMENT WITHIN INCOME SUBGROUPS (ANNUAL HOUSEHOLD)
Under RMB 48,000 95.5 97.1 95.8 96.7
Over RMB 48,000 105.2 106 106.4 106.9
INDEX OF CONSUMER SENTIMENT WITHIN AGE SUBGROUPS
20-34 104.2 105.9 105.9 107.0
35-54 96.4 99.2 98.3 98.1
55-64 95.8 97.7 95.5 95.7
COMPONENTS OF THE INDEX OF CONSUMER SENTIMENT
Current Index 100 103.1 101.4 100.2
Expectations Index 100 101.7 101.6 102.9
Personal Finance:
Current 123.8 129.2 126.8 122.2
Personal Finance:
Expected 128.9 131.9 130.4 129.1
Business Condition: 1
Year 135.1 134.8 134.7 137.8
Business Condition: 5
Years 149 153.4 154.6 158.1
Durable Buying
Conditions 103.4 105.1 103.4 105.5
INDEX OF SECTORS
Index of Stock
Investment 100 99.8 100.1 101.0
Index of Real Estate 100 97.8 99.9 100.1
Index of Car Purchase 100 104.1 100.3 98.5
Selected Consumer Voices
-- Meat is so expensive that we are eating vegetable all day. Well, I'm
sure it's good to our health.
-- I'm very confident about Chongqing's future. We surely will
outperform Hong Kong in five years.
-- Houses are so expensive today, but I have to prepare for the future.
If I don't buy now I will never be able to afford it.
For more information about Xinhua Finance eziData China Consumer Confidence Index or to subscribe to the full survey report, please contact us viainfo@eziData.com.
Methodology
Xinhua Finance eziData China Consumer Confidence Index is produced in association with Dr. Richard Curtin, Research Professor and Director of the Consumer Sentiment Surveys at the Institute of Social Research, University of Michigan. The index is based on a monthly survey of around 1,500 Chinese households via stratified random sampling in 50 representative cities across East, Middle and West China using the same methodology as is used by the University of Michigan. All data is collected via computer assisted telephone interviewing (CATI). Index of April 2007 survey is set as the benchmark (100).
Notes to editors:
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