Consumer optimism flying high

Consumer confidence in the first quarter of this year rose to its highest level since 2005, amid easing inflation and a cooling property market, according to a Nielson survey released on Thursday.

The quarterly consumer confidence index increased by 2 percentage points to 110 in the first quarter, making China the fourth most optimistic out of 56 markets measured.

"The government's firm support for small and medium-sized enterprises through expansion of credit, shifting policy to boost domestic consumption and demand, and continued enforcement of restrictions designed to deflate the real estate bubble are all contributing to consumer optimism," said Yan Xuan, president of Nielsen Greater China.

In April, the consumer price index, a main gauge of inflation, eased to 3.4 percent year-on-year from 3.6 percent in March, according to the National Bureau of Statistics.

Inflation may ease in the first three quarters, while rebounding slightly in the last, the NBS report said.

"As inflation is easing, amid a stabilizing economy, consumers feel more optimistic about the economy, job prospects and personal finances," Yan said.

Though GDP growth slowed to 8.1 percent in the first quarter, the fifth decline in a row, economists said the situation is not likely to worsen in the following quarters.

"The leading economic indicators we monitor have been stabilizing, indicating a further sharp growth fall is not likely," said Pan Jiancheng, deputy director of the China Economic Monitoring and Analysis Center, a research unit of the NBS.

Economic growth will recover due to an export rebound, property sales and stronger fiscal spending, Deutsche Bank AG said in a recent research note.

"We marginally revised down our 2012 GDP growth forecast by 0.1 percentage point to 8.5 percent on a technical change in the seasonal adjustment method," Ma Jun, the bank's chief economist, said.

For Dale Preston, senior vice-president, Analytic Consulting Greater China at Nielson, there is no direct link between GDP growth figures and consumer confidence.

"Consumer confidence is influenced more by inflation and property prices," Preston said.

According to Preston, enterprises should attach greater importance to rural consumers, a market of 650 million potential buyers.

The survey highlighted that rural consumers were the most confident section of the population.

"Rural consumer confidence has increased for the fourth consecutive quarter," Yan said. "Their positive outlook largely benefited from the government's determination to support the development of rural areas."

The government will continue to introduce additional supportive fiscal policies, such as raising subsidies for health insurance for farmers, and also plans to allocate more funding to rural areas this year.

Consumer confidence in rural areas led to a surge in the sales of consumer goods, the survey showed.

While the survey did reflect growing optimism there were also some cautionary elements. Optimism regarding job prospects increased by 5 percent as did expectations for wage increases, up 3 percent.

But willingness to actually spend money remained flat.

The percentage of people saving any spare cash rose to 59 percent from 56 percent in the previous quarter.

Nearly half of the respondents put spare cash into education savings for their children.