Consumers remain confident in Q1

Customers buy cosmetics at a store in Tanggu, Tianjin. First-quarter retail sales stood at 4.93 trillion yuan ($795 billion), up 14.8 percent year-on-year, the National Bureau of Statistics said. HE MAOFENG/CHINA DAILY

Chinese consumers' confidence stayed high in the first quarter even as the economy slowed, The Nielsen Co said on Tuesday.

The consulting firm's confidence index stood at 111, unchanged from the previous quarter and 3 points higher than a year earlier.

The global average was 96 in the first three months of 2014.

"Despite the economic slowdown, Chinese consumer fundamentals remain strong. And we believe consumer confidence will remain at a high level throughout 2014," said Yan Xuan, president of Nielsen Greater China.

Economic growth dipped to 7.4 percent in the first quarter, raising the risk that the country could miss this year's economic growth target of 7.5 percent. It would be the first such miss in 15 years.

"Besides robust consumer confidence, the healthy growth of disposable income for both rural and urban residents, both on an annual and quarterly basis, enabled the continuous growth of overall retail sales in China," said Yan.

According to the National Bureau of Statistics, first-quarter retail sales stood at 4.93 trillion yuan ($795 billion), up 14.8 percent year-on-year.

Nielsen's research showed that fast-moving consumer goods sales in China grew 8 percent in the first quarter, 2 percentage points faster than in the same period last year.

Sales of durable goods, usually defined as items meant to last for at least three years, recorded double-digit growth in the first quarter. For vehicles, the figure was 12.3 percent; for communications devices, it was 14.7 percent.

Nielsen found personal digital appliances led consumers' shopping lists, closely followed by home appliances.

"Chinese consumers' strong purchase intentions also contributed to the increasing importance of the service industry to China's overall GDP, which is essential for the ongoing restructuring of the economy from investment-led to domestic consumption-driven," said Yan.

A study by Australia and New Zealand Banking Group Ltd and Melbourne-based Roy Morgan Research Pty Ltd showed similar trends: Chinese consumer confidence is strengthening in small and medium-sized cities and remaining stable in large metropolitan areas.

By 2020, China's consumption will account for 44 percent of its GDP, the joint study found. It also said that the Chinese consumer market will be 70 percent of that of the United States by then, compared with 40 percent now.

The fast-growing middle class will also help boost retail sales, with about 100 million middle-class households entering the consumer market, according to Liu Ligang, economist with ANZ.

Meanwhile, Nielsen's survey indicates convergence among cities of various sizes and in different regions.

Lower-tier cities are catching up with first-tier cities in terms of consumer optimism, Nielsen said. From a regional perspective, consumer confidence levels are rising fast in the western region of the nation, in particular, the city of Chongqing and the provinces of Sichuan, Guizhou, Yunnan and Shaanxi, and the Guangxi Zhuang autonomous region.

For 17 FMCG categories measured by Nielsen, sales growth in China's midwest is at least twice as fast as the national average. In certain categories such as juice and toner, the gap is even wider.

"As consumers move up the consumption ladder, they are ready to spend more.

"The key to gain their wallet share lies in manufacturers and retailers finding the right products, at the right time, and through the right channels to reach these new and eager consumers," Yan added.