A key consumer confidence index dropped one point during the first quarter, reflecting a weakening outlook in China for employment and personal finances.
According to information and measurement company Nielsen NV's Chinese Consumer Confidence Index, released on Thursday, the result marked the second consecutive decline in the past year, with the index now standing at 106, down from 107 in the fourth quarter of last year and 111 in the first quarter of 2014.
The report showed that 69 percent of consumers were confident on job security, and 64 percent were confident of their personal income, both dropping three percentage points on the last quarter of 2014.
Their willingness to spend, however, showed an overall increase of 2 percentage points.
"Despite the slight decline in overall consumer confidence, willingness to spend is seeing a recovery compared with the fourth quarter of last year, especially among consumers in smaller cities," said Oliver Rust, Nielsen China's managing director.
Rust said that increased disposable income and continued rapid development of e-commerce meant there is significant consumer spending power to be released in China.
The nation's official Consumer Price Index, the main gauge of inflation, grew 1.5 percent year-on-year in April, slightly higher than 1.4 percent in March and 0.8 percent in January, when the CPI was at its lowest level in more than five years.
The economy expanded 7 percent in the first quarter－the lowest quarterly growth since 2009 but still well outpacing most major economies.
The slowdown came amid government efforts to make the economic growth model more sustainable.
Separately on Thursday, the ANZ Investment Bank said in a research note that China's economic growth could well have fallen below 7 percent in April.
Rust said he was "not concerned" about China's slowdown in growth, as the country remains "committed to a better structure, driven by domestic consumption", adding that "smaller cities will be a key driving force for such a restructuring".
Nielsen's confidence index showed strong indications that spending is likely to rise in the coming months.
Immediate spending intentions over the next 12 months jumped 8 percentage points to 50 percent among consumers in fourth-tier cities, or those living in towns and counties.
"These smaller cities, numbered at around 1,600 according to our figures, are telling an impressive consumer story that will be vitally important for China's consumption-driven economy in the years to come," said Rust.
The study found, he said, these small cities are now leading the momentum, particularly for the growing sales of fast moving consumer goods.
During the Chinese New Year holiday, for instance, the Nielsen study recorded that FMCG sales in counties and towns contributed strongly to overall sales nationwide with an increase of 21.2 percent, compared with 20.7 percent in the first quarter of 2014.
FMCG year-on-year growth in fourth-tier cities rose 11 percent in the first quarter of this year, compared with 4 percent in key cities like Beijing and Shanghai.
The Nielsen study concluded that these smaller cities are now a key driving force of the Chinese economy, accounting for 40 percent of the national population, 42 percent of the country's GDP, 35 percent of the retail sales and 21.2 percent of the FMCG sales.
Nielsen's global consumer confidence index showed a one point rise in the first quarter to a reading of 97, with China ranked ninth among the 60 countries and regions measured.
Yan Xuan, president of Nielsen China, said Chinese consumers remain more optimistic about job prospects, personal finances and spending in the coming year than peers in most global markets.
