Consumers' outlook brightens in May

Residents buy vegetables at a supermarket in Yichang, Hubei province. The Westpac MNI China Consumer Sentiment Indicator increased to 121.2 in May as personal finance and job conditions picked up. Liu Junfeng / For China Daily

Consumer sentiment improved this month, with rising public confidence that the government will act to support growth, according to a report released on Wednesday by Australia-based Westpac Banking Corp and Market News International.

The Westpac MNI China Consumer Sentiment Indicator increased to 121.2 in May from 117.3 in April as personal finance and job conditions picked up, a marked improvement from the lull seen in the previous three months, the report said.

A reading above 100 indicates increasing optimism, while one below 100 signals increasing pessimism.

The rise in sentiment was broadly based, with all five components increasing in concert for the first time since October 2013. The five components are: current personal financial conditions, the outlook for personal finances, the outlook for consumer durable purchases, the one-year business outlook and the five-year business outlook.

"The May data showed a marked improvement from the past three months, with consumers seemingly optimistic that the authorities won't stand by and let the economy weaken further. In spite of widespread concerns about the housing market, respondents were even more optimistic that prices will continue to rise," said Philip Uglow, chief economist for MNI Indicators.

President Xi Jinping said in early May that China will adapt to a "new norm" for economic growth and maintain its composure despite a slowdown during the process of economic transformation.

Although officials have reiterated that the nation will tolerate a limited economic slowdown, analysts believe some "mini-stimulus" or "stabilization" measures will be taken to prevent a sharp decline in the growth rate.

Some industries sensitive to such policies have started to benefit. The HSBC Holdings Plc flash Purchasing Managers Index climbed to a five-month high of 49.7 in May.

The government recently announced spending packages for infrastructure, including railways and housing, as well as tax relief programs.

The central bank has cut reserve requirements for some rural banks and urged the biggest lenders to accelerate the granting of home mortgages. And last week, the authorities opened a wider door to some local governments to sell municipal bonds.

As for the Westpac MNI survey, the one-year business outlook and current conditions for personal finance showed the most improvement.

Next came expected personal finances and the five-year business outlook. The consumer durables indicator posted the smallest increase.

"While an undercurrent of caution still remains, the survey indicates that the anxieties gnawing away at the Chinese consumer through the first four months of the year lessened considerably in May. Encouragingly, the outlook for employment took a turn for the better in May, consistent with the improvement in responses regarding business conditions and family finances," said Huw McKay, Westpac's senior international economist.

Consumers' view of the real estate sector improved in May, according to the survey, despite the steady media drumbeat of pessimism. House price expectations increased notably in the month, reversing declines in the first quarter.